10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended March 31, 2009

OR

[     ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number	Registrant	State of Incorporation	I.R.S. Employer Identification Number
1-16681	The Laclede Group, Inc.	Missouri	74-2976504
1-1822	Laclede Gas Company	Missouri	43-0368139

720 Olive Street

St. Louis, MO 63101

314-342-0500

Indicate by check mark if the registrant:

(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report) and (2) have been subject to such filing requirements for the past 90 days.

The Laclede Group, Inc.:	Yes	[ X ]	No	[     ]
Laclede Gas Company:	Yes	[ X ]	No	[     ]

has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

The Laclede Group, Inc.:	Yes	[     ]	No	[     ]
Laclede Gas Company:	Yes	[     ]	No	[     ]

is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

The Laclede Group, Inc.:
	Large accelerated filer	[ X ]	Accelerated filer	[     ]
	Non-accelerated filer	[     ]	Smaller reporting company	[     ]
Laclede Gas Company:
	Large accelerated filer	[     ]	Accelerated filer	[     ]
	Non-accelerated filer	[ X ]	Smaller reporting company	[     ]

is a shell company (as defined in Rule 12b-2 of the Exchange Act):

The Laclede Group, Inc.:	Yes	[     ]	No	[ X ]
Laclede Gas Company:	Yes	[     ]	No	[ X ]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:

		Shares Outstanding At
Registrant	Description of Common Stock	April 29, 2009
The Laclede Group, Inc.:	Common Stock ($1.00 Par Value)	22,147,631
Laclede Gas Company:	Common Stock ($1.00 Par Value)	11,614  *

* 100% owned by The Laclede Group, Inc.

2

TABLE OF CONTENTS			Page No.
PART 1. FINANCIAL INFORMATION
Item 1	Financial Statements
	The Laclede Group, Inc.:
		Statements of Consolidated Income	5
		Statements of Consolidated Comprehensive Income	6
		Consolidated Balance Sheets	7-8
		Statements of Consolidated Cash Flows	9
		Notes to Consolidated Financial Statements	10-25
	Laclede Gas Company:
		Statements of Income	Ex. 99.1, p. 1
		Statements of Comprehensive Income	Ex. 99.1, p. 2
		Balance Sheets	Ex. 99.1, p. 3-4
		Statements of Cash Flows	Ex. 99.1, p. 5
		Notes to Financial Statements	Ex. 99.1, p. 6-15
Item 2	Management’s Discussion and Analysis of Financial Condition and
		Results of Operations (The Laclede Group, Inc.)	26-38
	Management’s Discussion and Analysis of Financial Condition and
		Results of Operations (Laclede Gas Company)	Ex. 99.1, p. 16-26
Item 3	Quantitative and Qualitative Disclosures About Market Risk		39
Item 4	Controls and Procedures		39
PART II.  OTHER INFORMATION
Item 1	Legal Proceedings		40
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds		40
Item 4	Submission of Matters to a Vote of Security Holders		40
Item 5	Other Information		40
Item 6	Exhibits		40
SIGNATURES – The Laclede Group, Inc.			41
SIGNATURES – Laclede Gas Company			42
INDEX TO EXHIBITS			43

FILING FORMAT

This Quarterly Report on Form 10-Q is a combined report being filed by two separate registrants: The Laclede Group, Inc. (Laclede Group or the Company) and Laclede Gas Company (Laclede Gas or the Utility).

3

PART I. FINANCIAL INFORMATION

The interim financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s Form 10-K for the fiscal year ended September 30, 2008.

4

Item 1. Financial Statements

THE LACLEDE GROUP, INC.

STATEMENTS OF CONSOLIDATED INCOME

(UNAUDITED)

	Three Months Ended				Six Months Ended
	March 31,				March 31,
(Thousands, Except Per Share Amounts)		2009		2008		2009		2008
Operating Revenues:
Regulated Gas Distribution	$	440,468	$	507,089	$	798,569	$	827,981
Non-Regulated Gas Marketing		217,589		239,387		532,629		421,185
Other		1,011		1,230		2,126		2,530
Total Operating Revenues		659,068		747,706		1,333,324		1,251,696
Operating Expenses:
Regulated Gas Distribution
Natural and propane gas		313,506		377,526		568,403		600,367
Other operation expenses		40,251		38,989		76,552		74,202
Maintenance		7,261		5,814		13,795		12,049
Depreciation and amortization		9,180		8,763		18,299		17,476
Taxes, other than income taxes		28,216		29,255		46,574		45,936
Total Regulated Gas Distribution Operating Expenses		398,414		460,347		723,623		750,030
Non-Regulated Gas Marketing		204,487		234,021		496,088		406,893
Other		927		1,455		1,685		2,713
Total Operating Expenses		603,828		695,823		1,221,396		1,159,636
Operating Income		55,240		51,883		111,928		92,060
Other Income and (Income Deductions) – Net		247		1,076		986		3,725
Interest Charges:
Interest on long-term debt		6,145		4,875		12,291		10,001
Interest on long-term debt to unconsolidated affiliate trust		—		70		—		139
Other interest charges		1,168		2,056		3,814		6,219
Total Interest Charges		7,313		7,001		16,105		16,359
Income from Continuing Operations Before Income Taxes
and Dividends on Laclede Gas Redeemable Preferred Stock		48,174		45,958		96,809		79,426
Income Tax Expense		17,356		15,889		34,677		27,811
Dividends on Laclede Gas Redeemable Preferred Stock		7		9		15		19
Income from Continuing Operations		30,811		30,060		62,117		51,596
Income from Discontinued Operations, Net
of Income Tax (Note 2)		—		21,294		—		20,661
Net Income	$	30,811	$	51,354	$	62,117	$	72,257
Average Number of Common Shares Outstanding:
Basic		21,891		21,589		21,874		21,571
Diluted		22,017		21,685		22,015		21,653
Basic Earnings Per Share of Common Stock:
Income from Continuing Operations	$	1.41	$	1.39	$	2.84	$	2.39
Income from Discontinued Operations		—		0.99		—		0.96
Net Income	$	1.41	$	2.38	$	2.84	$	3.35
Diluted Earnings Per Share of Common Stock:
Income from Continuing Operations	$	1.40	$	1.39	$	2.82	$	2.38
Income from Discontinued Operations		—		0.98		—		0.96
Net Income	$	1.40	$	2.37	$	2.82	$	3.34
Dividends Declared Per Share of Common Stock	$	0.385	$	0.375	$	0.770	$	0.750
See Notes to Consolidated Financial Statements.

5

THE LACLEDE GROUP, INC.

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

(UNAUDITED)

	Three Months Ended						Six Months Ended
	March 31,						March 31,
(Thousands)		2009			2008			2009			2008
Net Income	$	30,811		$	51,354		$	62,117		$	72,257
Other Comprehensive Income (Loss), Before Tax:
Net gains (losses) on cash flow hedging derivative instruments:
Net hedging gain (loss) arising during period		5,002			(6,022	)		7,041			(5,878	)
Reclassification adjustment for gains included in net income		(2,295	)		(1,706	)		(10,567	)		(4,440	)
Net unrealized gains (losses) on cash flow hedging
derivative instruments		2,707			(7,728	)		(3,526	)		(10,318	)
Amortization of actuarial loss included in net periodic
pension and postretirement benefit cost		50			43			100			86
Other Comprehensive Income (Loss), Before Tax		2,757			(7,685	)		(3,426	)		(10,232	)
Income Tax Expense (Benefit) Related to Items of Other
Comprehensive Income (Loss)		1,063			(2,969	)		(1,317	)		(3,953	)
Other Comprehensive Income (Loss), Net of Tax		1,694			(4,716	)		(2,109	)		(6,279	)
Comprehensive Income	$	32,505		$	46,638		$	60,008		$	65,978
See Notes to Consolidated Financial Statements.

6

THE LACLEDE GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	March 31,			Sept. 30,			March 31,
(Thousands)	2009			2008			2008
ASSETS
Utility Plant	$	1,247,921		$	1,229,174		$	1,204,984
Less:  Accumulated depreciation and amortization		414,956			405,977			398,661
Net Utility Plant		832,965			823,197			806,323
Non-utility property		4,591			3,793			4,026
Other investments		43,805			43,314			44,664
Other Property and Investments		48,396			47,107			48,690
Current Assets:
Cash and cash equivalents		93,602			14,899			145,510
Accounts receivable:
Utility		166,854			98,708			218,674
Non-utility		64,505			102,389			97,548
Other		5,090			10,486			5,513
Allowances for doubtful accounts		(12,666	)		(12,624	)		(13,749	)
Delayed customer billings		35,213			—			40,417
Inventories:
Natural gas stored underground at LIFO cost		69,940			206,267			31,749
Propane gas at FIFO cost		19,861			19,911			19,904
Materials, supplies, and merchandise at average cost		5,501			5,301			5,409
Derivative instrument assets		30,652			57,210			15,133
Unamortized purchased gas adjustments		8,891			33,411			4,365
Deferred income taxes		—			—			3,029
Prepayments and other		14,535			25,950			5,488
Total Current Assets		501,978			561,908			578,990
Deferred Charges:
Regulatory assets		395,869			334,755			265,495
Other		5,748			5,688			6,366
Total Deferred Charges		401,617			340,443			271,861
Total Assets	$	1,784,956		$	1,772,655		$	1,705,864

7

THE LACLEDE GROUP, INC.

CONSOLIDATED BALANCE SHEETS (Continued)

(UNAUDITED)

	March 31,		Sept. 30,		March 31,
(Thousands, except share amounts)	2009		2008		2008
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock (70,000,000 shares authorized, 22,138,864,     21,993,473, and 21,810,222 shares issued, respectively)	$	22,139	$	21,993	$	21,810
Paid-in capital		151,327		147,241		139,763
Retained earnings		357,887		312,808		323,581
Accumulated other comprehensive income (loss)		2,328		4,437		(4,422	)
Total Common Stock Equity		533,681		486,479		480,732
Laclede Gas redeemable preferred stock     (less current sinking fund requirements)		—		467		467
Long-term debt to unconsolidated affiliate trust		—		—		46,400
Long-term debt – Laclede Gas		389,211		389,181		309,152
Total Capitalization		922,892		876,127		836,751
Current Liabilities:
Notes payable		238,800		215,900		171,650
Accounts payable		100,416		159,580		186,944
Advance customer billings		—		25,548		—
Current portion of preferred stock		—		160		160
Wages and compensation accrued		12,304		12,197		11,880
Dividends payable		8,675		8,400		8,303
Customer deposits		13,045		14,020		13,960
Interest accrued		10,333		10,094		10,185
Taxes accrued		34,078		11,387		39,921
Deferred income taxes current		1,959		11,669		—
Other		9,616		10,249		7,419
Total Current Liabilities		429,226		479,204		450,422
Deferred Credits and Other Liabilities:
Deferred income taxes		232,446		222,761		232,531
Unamortized investment tax credits		3,863		3,973		4,086
Pension and postretirement benefit costs		103,226		98,513		67,515
Asset retirement obligations		27,638		26,833		26,908
Regulatory liabilities		42,506		42,191		64,027
Other		23,159		23,053		23,624
Total Deferred Credits and Other Liabilities		432,838		417,324		418,691
Total Capitalization and Liabilities	$	1,784,956	$	1,772,655	$	1,705,864
See Notes to Consolidated Financial Statements.

8

THE LACLEDE GROUP, INC.

STATEMENTS OF CONSOLIDATED CASH FLOWS

(UNAUDITED)

	Six Months Ended
	March 31,
(Thousands)	2009			2008
Operating Activities:
Net Income	$	62,117		$	72,257
Adjustments to reconcile net income to net cash provided by (used in)       operating activities:
Gain on sale of discontinued operations		—			(44,491	)
Depreciation, amortization, and accretion		18,446			18,931
Deferred income taxes and investment tax credits		(3,819	)		(2,696	)
Other – net		3,412			1,410
Changes in assets and liabilities:
Accounts receivable – net		(24,824	)		(159,133	)
Unamortized purchased gas adjustments		24,520			8,448
Deferred purchased gas costs		(54,990	)		53,094
Accounts payable		(57,281	)		87,835
Delayed customer billings - net		(60,761	)		(65,857	)
Taxes accrued		22,683			18,999
Natural gas stored underground		136,327			106,507
Other assets and liabilities		32,951			35,467
Net cash provided by operating activities		98,781			130,771
Investing Activities:
Proceeds from sale of discontinued operations		—			83,229
Capital expenditures		(26,597	)		(27,744	)
Other investments		(1,446	)		26
Net cash (used in) provided by investing activities		(28,043	)		55,511
Financing Activities:
Maturity of First Mortgage Bonds		—			(40,000	)
Issuance (repayment) of short-term debt – net		22,900			(39,750	)
Changes in book overdrafts		419			—
Issuance of common stock		2,705			2,860
Non-employee directors’ restricted stock awards		(570	)		(421	)
Dividends paid		(16,757	)		(16,064	)
Preferred stock reacquired		(627	)		(160	)
Employees’ taxes paid associated with restricted shares withheld upon vesting		(675	)		—
Excess tax benefits from stock-based compensation		686			17
Other		(116	)		—
Net cash provided by (used in) financing activities		7,965			(93,518	)
Net Increase in Cash and Cash Equivalents		78,703			92,764
Cash and Cash Equivalents at Beginning of Period		14,899			52,746
Cash and Cash Equivalents at End of Period	$	93,602		$	145,510
Supplemental Disclosure of Cash Paid During the Period for:
Interest	$	15,768		$	19,662
Income taxes		9,254			22,501
See Notes to Consolidated Financial Statements.

9

THE LACLEDE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These notes are an integral part of the accompanying consolidated financial statements of The Laclede Group, Inc. (Laclede Group or the Company) and its subsidiaries. In the opinion of Laclede Group, this interim report includes all adjustments (consisting of only normal recurring accruals) necessary for the fair presentation of the results of operations for the periods presented. This Form 10-Q should be read in conjunction with the Notes to Consolidated Financial Statements contained in the Company’s Fiscal Year 2008 Form 10-K.

The consolidated financial position, results of operations, and cash flows of Laclede Group are comprised primarily from the financial position, results of operations, and cash flowsof Laclede Gas Company (Laclede Gas or the Utility). Laclede Gas is a regulated natural gas distribution utility having a material seasonal cycle. As a result, these interim statements of income for Laclede Group are not necessarily indicative of annual results or representative of succeeding quarters of the fiscal year. Due to the seasonal nature of the business of Laclede Gas, earnings are typically concentrated in the November through April period, which generally corresponds with the heating season.

REVENUE RECOGNITION - Laclede Gas reads meters and bills its customers on monthly cycles. The Utility records its regulated gas distribution revenues from gas sales and transportation services on an accrual basis that includes estimated amounts for gas delivered, but not yet billed. The accruals for unbilled revenues are reversed in the subsequent accounting period when meters are actually read and customers are billed. The amounts of accrued unbilled revenues at March 31, 2009 and 2008, for the Utility, were $26.2 million and $31.9 million, respectively. The amount of accrued unbilled revenue at September 30, 2008 was $13.5 million.

CASH AND CASH EQUIVALENTS - All highly liquid debt instruments purchased with original maturities of three months or less are considered to be cash equivalents. Such instruments are carried at cost, which approximates market value. Outstanding checks on the Company’s controlled disbursement bank accounts in excess of funds on deposit create book overdrafts (which are funded at the time checks are presented for payment) and are classified as Other Current Liabilities on the Consolidated Balance Sheets. Changes in book overdrafts between periods are reflected as Financing Activities in the Statements of Consolidated Cash Flows.

GROSS RECEIPTS TAXES - Gross receipts taxes associated with Laclede Gas’ natural gas utility service are imposed on the Utility and billed to its customers. These amounts are recorded gross in the Statements of Consolidated Income. Amounts recorded in Utility Operating Revenues for the quarters ended March 31, 2009 and 2008 were $23.8 million, and $25.2 million, respectively. Amounts recorded in Regulated Gas Distribution Operating Revenues for the six months ended March 31, 2009 and 2008 were $38.6 million and $38.2 million, respectively. Gross receipts taxes are expensed by the Utility and included in the Taxes, Other Than Income Taxes line.

STOCK-BASED COMPENSATION - Awards of stock-based compensation are made pursuant to The Laclede Group 2006 Equity Incentive Plan and the Restricted Stock Plan for Non-Employee Directors. Refer to Note 1 of the Consolidated Financial Statements included in the Company’s Form 10-K for the fiscal year ended September 30, 2008 for descriptions of these plans. In January 2009, shareholders approved an amendment to the Restricted Stock Plan for Non-Employee Directors (Plan), increasing the number of shares of common stock available under the Plan to 150,000 from 50,000.

Restricted Stock Awards

During the six months ended March 31, 2009, the Company awarded 89,850 performance-contingent restricted shares and share units to executive officers at a weighted average grant fair value of $47.17 per share. This number represents the maximum shares that can be earned pursuant to the terms of the awards. The shares and share units were awarded on November 5, 2008 and have a performance period ending September 30, 2011, during which participants are entitled to receive full dividends and voting rights on the target level, or 59,900 shares. The number of shares and share units that will ultimately vest is dependent upon the attainment of certain levels of earnings growth and portfolio development performance goals; further, under the terms of the award, the Compensation Committee of the Board of Directors may reduce by up to 25% the number that vest if the Company’s total shareholder return (TSR) during the performance period ranks below the median relative to a comparator group of companies. This TSR provision is considered a market condition under generally accepted accounting principles.

On November 2, 2008, 43,000 shares of performance-contingent restricted stock, awarded on November 2, 2005, vested. On that date, the Company withheld 12,615 of these vested shares at an average price of $53.48 per share pursuant to elections by employees to satisfy tax withholding obligations.

10

Performance-contingent restricted stock and performance-contingent restricted stock unit activity for the six months ended March 31, 2009 is presented below:

			Weighted
			Average
	Shares/		Grant Date
	Units		Fair Value
Nonvested at September 30, 2008	179,100			$	31.40
Granted	89,850			$	47.17
Vested	(43,000	)		$	30.46
Forfeited	—			$	—
Nonvested at March 31, 2009	225,950			$	37.85

During the six months ended March 31, 2009, the Company awarded 27,100 shares of time-vested restricted stock to executives and key employees at a weighted average grant date fair value of $50.89 per share. These shares were awarded on November 5, 2008 and vest November 5, 2011. On March 31, 2009, the Company also awarded 800 shares of time-vested restricted stock to key employees at a weighted average grant date fair value of $38.98 per share. These shares vest April 1, 2012. In the interim, participants receive full dividends and voting rights.

During the six months ended March 31, 2009, the Company awarded 12,500 shares of time-vested restricted stock to non-employee directors at a weighted average grant date fair value of $46.52 per share. These shares vest depending on the participant’s age upon entering the plan and years of service as a director. The plan’s trustee acquires the shares for the awards in the open market and holds the shares as trustee for the benefit of the non-employee directors until the restrictions expire. In the interim, the participants receive full dividends and voting rights.

Time-vested restricted stock and time-vested restricted stock unit activity for the six months ended March 31, 2009 is presented below:

			Weighted
			Average
	Shares/		Grant Date
	Units		Fair Value
Nonvested at September 30, 2008	56,850			$	32.36
Granted	40,400			$	49.30
Vested	(5,400	)		$	42.36
Forfeited	(800	)		$	42.57
Nonvested at March 31, 2009	91,050			$	39.20

11

Stock Option Awards

Stock option activity for the six months ended March 31, 2009 is presented below:

					Weighted
					Average
			Weighted		Remaining	Aggregate
			Average		Contractual	Intrinsic
	Stock		Exercise		Term	Value
	Options		Price		(Years)	($000)
Outstanding at September 30, 2008	415,850		$	30.84
Granted	—		$	—
Exercised	(45,625	)	$	31.36
Forfeited	(3,000	)	$	33.45
Expired	(2,500	)	$	32.26
Outstanding at March 31, 2009	364,725		$	30.75	5.8	$	3,003
Fully Vested and Expected to Vest   at March 31, 2009	359,658		$	30.71	5.8	$	2,976
Exercisable at March 31, 2009	292,350		$	30.04	5.5	$	2,614

The closing price of the Company’s common stock was $38.98 at March 31, 2009.

Equity Compensation Costs

The amounts of compensation cost recognized for share-based compensation arrangements are presented below:

	Three Months Ended						Six Months Ended
	March 31,						March 31,
(Thousands)	2009			2008			2009			2008
Total compensation cost	$	1,257		$	766		$	2,099		$	1,422
Compensation cost capitalized		(253	)		(163	)		(433	)		(298	)
Compensation cost recognized in net income		1,004			603			1,666			1,124
Income tax benefit recognized in net income		(386	)		(233	)		(642	)		(434	)
Compensation cost recognized in net income,
net of income tax	$	618		$	370		$	1,024		$	690

As of March 31, 2009, there was $7.2 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted average period of 2.5 years.

12

NEW ACCOUNTING STANDARDS – In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements.” This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The Statement applies to fair value measurements required under other accounting guidance that require or permit fair value measurements. Accordingly, this Statement does not require any new fair value measurements. The guidance in this Statement does not apply to the Company’s stock-based compensation plans accounted for in accordance with SFAS No. 123(R), “Share-Based Payment.” The Company partially adopted SFAS No. 157 on October 1, 2008 and elected the one-year deferral allowed by FASB Staff Position (FSP) No. FAS 157-2, which permits delayed application of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except for those recognized or disclosed at fair value on a recurring basis. The partial adoption of SFAS No. 157 had no impact on the Company’s financial position or results of operations. For disclosures required pursuant to SFAS No. 157, see Note 5, Fair Value Measurements. The Company will adopt SFAS No. 157 for certain nonfinancial assets and nonfinancial liabilities (primarily asset retirement obligations) as of the beginning of fiscal year 2010 and does not anticipate that such adoption will have a material impact on the Company’s financial position or results of operations.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.” Laclede Group adopted the recognition and disclosure provisions of this Statement effective September 30, 2007. The Statement also requires that plan assets and benefit obligations be measured as of the date of the employer’s fiscal year-end statement of financial position. In conjunction with adoption of this provision of SFAS No. 158, the Company will be required to change its valuation date for its pension and other postretirement plans from June 30 to September 30. The Company will adopt this provision on September 30, 2009. Adoption will require certain adjustments to retained earnings and other comprehensive income, the total amounts of which will not be known until the September 30, 2009 actuarial valuation of the plans is complete. However, the majority of these adjustments, attributable to the Company’s qualified pension plans and other postretirement benefit plans, are expected to be deferred with entries to Regulatory assets.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” The Statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. This Statement does not affect any existing accounting literature that requires certain assets and liabilities to be carried at fair value. Upon adoption of SFAS No. 159, entities are permitted to choose, at specified election dates, to measure eligible items at fair value (fair value option). Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each reporting date. The decision about whether to elect the fair value option is applied instrument by instrument with few exceptions. The decision is also irrevocable (unless a new election date occurs) and must be applied to entire instruments and not to portions of instruments. SFAS No. 159 requires that cash flows related to items measured at fair value be classified in the statement of cash flows according to their nature and purpose as required by SFAS No. 95, “Statement of Cash Flows” (as amended). The Company adopted SFAS No. 159 on October 1, 2008. The Company did not elect the fair value option for any instruments not currently reported at fair value. Therefore, the adoption of this Statement had no effect on the Company’s financial position or results of operations.

In June 2007, the FASB ratified the consensus reached in Emerging Issues Task Force (EITF) Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards.” This Issue addresses how an entity should recognize the tax benefit received on dividends that are (a) paid to employees holding equity-classified nonvested shares, equity-classified nonvested share units, or equity-classified outstanding share options and (b) charged to retained earnings under SFAS No. 123(R). The Task Force reached a consensus that such tax benefits should be recognized as an increase in additional paid-in capital. This EITF Issue also addresses how the accounting for these tax benefits is affected if an entity’s estimate of forfeitures changes in subsequent periods. With the adoption of this EITF issue on October 1, 2008, the Company now records these income tax benefits as increases to additional paid-in capital. Previously, the Company recorded these income tax benefits as reductions to income tax expense. Adoption of this EITF issue did not have a material effect on the Company’s financial position or results of operations.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities.” This Statement amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” by requiring enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This Statement is effective for the Company’s interim and annual financial statements beginning with the second quarter of fiscal year 2009. The adoption of this standard had no effect on the Company’s financial position or results of operations. For disclosures required pursuant to SFAS No. 161, see Note 6, Derivative Instruments and Hedging Activities.

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In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.” SFAS No. 162 identifies the sources of accounting principles and the framework for selecting principles to be used in the preparation and presentation of financial statements in accordance with generally accepted accounting principles. The Company adopted this Statement effective November 15, 2008. The adoption of SFAS No. 162 did not have any effect on the Company’s consolidated financial statements.

In June 2008, the FASB issued FSP No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.” This FSP addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share (EPS) under the two-class method described by SFAS No. 128, “Earnings per Share.” The guidance in this FSP states that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of EPS pursuant to the two-class method. This FSP is effective for Laclede Group as of the beginning of fiscal year 2010. The FSP requires that the guidance be applied retrospectively to all prior-period EPS data presented. The Company is currently assessing the potential impact of this FSP on its EPS calculations.

In December 2008, the FASB issued FSP No. FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets.” This FSP provides guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. The FSP requires disclosure of information regarding investment policies and strategies, the categories of plan assets, fair value measurements of plan assets, and significant concentrations of risk. The Company will be required to provide the additional disclosures with its annual financial statements for fiscal year 2010. The Company is currently evaluating the provisions of this FSP.

In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments.” This FSP requires entities to provide disclosure of the fair value of all financial instruments for which it is practicable to estimate that value, whether recognized or not recognized in the balance sheet, in interim reporting periods. Prior to the issuance of this FSP, such disclosures were required only in annual reporting periods. The FSP does not require disclosures for earlier periods presented for comparative purposes at initial adoption. Laclede Group will provide the required disclosures beginning with the third quarter of fiscal year 2009, as required by the FSP.

2. DISCONTINUED OPERATIONS

On March 31, 2008, the Company completed the sale of 100% of its interest in its wholly-owned subsidiary, SM&P Utility Resources, Inc. (SM&P), to Stripe Acquisition, Inc. (an affiliate of Kohlberg Management VI, LLC) for $85 million in cash, subject to certain closing and post-closing adjustments. SM&P is an underground facilities locating and marking business that previously comprised Laclede Group’s Non-Regulated Services operating segment. The sales agreement included representations, warranties, and indemnification provisions customary for such transactions and was filed as an exhibit to the March 31, 2008 Form 10-Q. For information concerning Laclede Group’s obligations under these provisions, see Note 10, Commitments and Contingencies.

In accordance with generally accepted accounting principles, the operating results of SM&P have been aggregated and reported on the Statements of Consolidated Income as Income from Discontinued Operations, Net of Income Tax. The Company has reported in discontinued operations interest expense based on amounts previously recorded by SM&P. For the quarter ended March 31, 2008, discontinued operations includes pre-tax interest expense of $0.8 million. For the six months ended March 31, 2008, discontinued operations includes pre-tax interest expense of $1.6 million. Discontinued operations does not include general corporate overhead expense. Income from Discontinued Operations reported in the Statements of Consolidated Income consists of the following:

	Three Months Ended					Six Months Ended
	March 31,					March 31,
(Thousands)	2009		2008			2009		2008
Operating revenues	$	—	$	28,062		$	—	$	65,423
Loss from operations		—		(8,433	)		—		(9,387	)
Gain on disposal		—		44,491			—		44,491
Pre-tax income		—		36,058			—		35,104
Income tax expense		—		14,764			—		14,443
Income From Discontinued Operations	$	—	$	21,294		$	—	$	20,661

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3. EARNINGS PER SHARE

SFAS No. 128 requires dual presentation of basic and diluted EPS. Basic EPS does not include potentially dilutive securities and is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted EPS assumes the issuance of common shares pursuant to the Company’s stock-based compensation plans at the beginning of each respective period, or at the date of grant or award, if later. Shares attributable to stock options and time-vested restricted stock are excluded from the calculation of diluted earnings per share if the effect would be antidilutive. For both the quarter and six months ended March 31, 2009, no shares attributable to antidilutive outstanding stock options were excluded from the calculation of diluted earnings per share. For the quarter and six months ended March 31, 2008, 105,500 shares attributable to stock options were excluded. For the quarter and six months ended March 31, 2009, there were 36,300 and 9,600 shares, respectively, attributable to antidilutive outstanding time-vested restricted stock that were excluded. For the quarter and six months ended March 31, 2008, no shares attributable to time-vested restricted stock were excluded. Performance-contingent restricted stock awards are only included in the calculation of diluted earnings per share to the extent the underlying performance conditions are satisfied (a) prior to the end of the reporting period or (b) would be satisfied if the end of the reporting period were the end of the related contingency period and the result would be dilutive. For both the quarter and six months ended March 31, 2009 185,550 shares and share units of nonvested performance-contingent restricted stock were excluded from the calculation of diluted earnings per share. For both the quarter and six months ended March 31, 2008, there were 158,200 shares and share units excluded.

	Three Months Ended				Six Months Ended
	March 31,				March 31,
(Thousands, Except Per Share Amounts)		2009		2008		2009		2008
Basic EPS:
Income from Continuing Operations	$	30,811	$	30,060	$	62,117	$	51,596
Weighted Average Shares Outstanding		21,891		21,589		21,874		21,571
Earnings Per Share of Common Stock from
Continuing Operations	$	1.41	$	1.39	$	2.84	$	2.39
Diluted EPS:
Income from Continuing Operations	$	30,811	$	30,060	$	62,117	$	51,596
Weighted Average Shares Outstanding		21,891		21,589		21,874		21,571
Dilutive Effect of Stock Options
and Restricted Stock		126		96		141		82
Weighted Average Diluted Shares		22,017		21,685		22,015		21,653
Earnings Per Share of Common Stock from
Continuing Operations	$	1.40	$	1.39	$	2.82	$	2.38

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4. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

Pension Plans

Laclede Gas has non-contributory defined benefit, trusteed forms of pension plans covering substantially all employees. Effective January 1, 2009, the Company modified the calculation of future benefits under the primary plan from a years of service and final average compensation formula to a cash balance formula which accrues benefits based on a percentage of compensation. Benefits attributable to plan participation prior to January 1, 2009 will be based on final average compensation at the date of termination of employment and years of service earned through January 1, 2009. Plan assets consist primarily of corporate and U.S. government obligations and pooled equity funds.

Pension costs for both the quarters ending March 31, 2009 and 2008 were $1.5 million, including amounts charged to construction. Pension costs for both the six months ended March 31, 2009 and 2008 were $3.1 million, including amounts charged to construction.

The net periodic pension costs include the following components:

	Three Months Ended						Six Months Ended
	March 31,						March 31,
(Thousands)	2009			2008			2009			2008
Service cost – benefits earned
during the period	$	1,817		$	3,243		$	5,302		$	6,485
Interest cost on projected
benefit obligation		5,229			4,670			10,497			9,340
Expected return on plan assets		(5,234	)		(5,163	)		(10,469	)		(10,325	)
Amortization of prior service cost		259			272			518			544
Amortization of actuarial loss		774			791			1,548			1,582
Sub-total		2,845			3,813			7,396			7,626
Regulatory adjustment		(1,296	)		(2,280	)		(4,298	)		(4,560	)
Net pension cost	$	1,549		$	1,533		$	3,098		$	3,066

Pursuant to the provisions of the Laclede Gas pension plans, pension obligations may be satisfied by lump-sum cash payments. Pursuant to a Missouri Public Service Commission (MoPSC or Commission) Order, lump-sum payments are recognized as settlements (which can result in gains or losses) only if the total of such payments exceeds 100% of the sum of service and interest costs. No lump-sum payments were recognized as settlements during the six months ended March 31, 2009 and March 31, 2008.

Pursuant to a MoPSC Order, the return on plan assets is based on the market-related value of plan assets implemented prospectively over a four-year period. Gains or losses not yet includible in pension cost are amortized only to the extent that such gain or loss exceeds 10% of the greater of the projected benefit obligation or the market-related value of plan assets. Such excess is amortized over the average remaining service life of active participants. The recovery in rates for the Utility’s qualified pension plans is based on an allowance of $4.8 million annually effective August 1, 2007. The difference between this amount and pension expense as calculated pursuant to the above and that otherwise would be included in the Statements of Consolidated Income and Consolidated Comprehensive Income is deferred as a regulatory asset or regulatory liability.

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Postretirement Benefits

Laclede Gas provides certain life insurance benefits at retirement. Medical insurance is available after early retirement until age 65. The transition obligation not yet includible in postretirement benefit cost is being amortized over 20 years. Postretirement benefit costs for both the quarters ended March 31, 2009 and 2008 were $1.9 million, including amounts charged to construction. Postretirement benefit costs for both the six months ended March 31, 2009 and 2008 were $3.8 million, including amounts charged to construction.

Net periodic postretirement benefit costs consisted of the following components:

	Three Months Ended						Six Months Ended
	March 31,						March 31,
(Thousands)	2009			2008			2009			2008
Service cost – benefits earned
during the period	$	1,283		$	1,140		$	2,566		$	2,280
Interest cost on accumulated
postretirement benefit obligation		1,170			977			2,340			1,954
Expected return on plan assets		(594	)		(509	)		(1,188	)		(1,019	)
Amortization of transition obligation		34			34			68			68
Amortization of prior service cost		(582	)		(582	)		(1,164	)		(1,164	)
Amortization of actuarial loss		877			746			1,754			1,492
Sub-total		2,188			1,806			4,376			3,611
Regulatory adjustment		(277	)		105			(555	)		210
Net postretirement benefit cost	$	1,911		$	1,911		$	3,821		$	3,821

Missouri state law provides for the recovery in rates of SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” accrued costs provided that such costs are funded through an independent, external funding mechanism. Laclede Gas established Voluntary Employees’ Beneficiary Association (VEBA) and Rabbi trusts as its external funding mechanisms. VEBA and Rabbi trusts’ assets consist primarily of money market securities and mutual funds invested in stocks and bonds.

Pursuant to a MoPSC Order, the return on plan assets is based on the market-related value of plan assets implemented prospectively over a four-year period. Gains and losses not yet includible in postretirement benefit cost are amortized only to the extent that such gain or loss exceeds 10% of the greater of the accumulated postretirement benefit obligation or the market-related value of plan assets. Such excess is amortized over the average remaining service life of active participants. Previously, the recovery in rates for the postretirement benefit costs was based on an alternative methodology for amortization of unrecognized gains and losses as ordered by the MoPSC. The Commission ordered that the recovery in rates be based on an annual allowance of $7.6 million, effective August 1, 2007. The difference between this amount and postretirement benefit cost based on the above and that otherwise would be included in the Statements of Consolidated Income and Consolidated Comprehensive Income is deferred as a regulatory asset or regulatory liability.

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5. FAIR VALUE MEASUREMENTS

As discussed in the New Accounting Standards section of Note 1, effective October 1, 2008, the Company partially adopted the provisions of SFAS No. 157. This Statement establishes a three-level hierarchy for fair value measurements that prioritizes the inputs used to measure fair value. Assessment of the significance of a particular input to the fair value measurements may require judgment and may affect the valuation of the asset or liability and its placement within the fair value hierarchy.

The following table categorizes the assets and liabilities in the Consolidated Balance Sheets that are accounted for at fair value on a recurring basis in periods subsequent to initial recognition.

As of March 31, 2009
(Thousands)		Quoted Prices in Active Markets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Effects of Netting and Cash Margin Receivables /Payables			Total
Assets
Marketable securities	$	8,325	$	—	$	—	$	—		$	8,325
Derivative instruments		10,521		156		—		19,975			30,652
Total	$	18,846	$	156	$	—	$	19,975		$	38,977
Liabilities
Derivative instruments	$	112,929	$	—	$	—	$	(112,929	)	$	—

Marketable securities included in Level 1 are mutual funds valued based on quoted market prices of identical securities that are provided by the trustees of these securities. Derivative instruments included in Level 1 are valued using quoted market prices on the New York Mercantile Exchange (NYMEX). Derivative instruments included in Level 2 are valued using broker or dealer quotation services or by using observable market inputs. Marketable securities are included in the Other investments line of the Consolidated Balance Sheets. Liabilities for derivative instruments, if any, are included in the Other line of the Current Liabilities section of the Consolidated Balance Sheets. Derivative assets and liabilities, including receivables and payables associated with cash margin requirements, are presented net in the Consolidated Balance Sheets when a legally enforceable netting agreement exists between the Company and the counterparty to a derivative contract.

6. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Laclede Gas has a risk management policy that allows for the purchase of natural gas derivative instruments with the goal of managing price risk associated with purchasing natural gas on behalf of its customers. This policy prohibits speculation. The policy permits the Utility to hedge up to 70% of its normal volumes purchased for up to a 36-month period. Costs and cost reductions, including carrying costs, associated with the Utility’s use of natural gas derivative instruments are allowed to be passed on to the Utility’s customers through the operation of its Purchased Gas Adjustment (PGA) Clause, through which the MoPSC allows the Utility to recover gas supply costs, subject to prudence review. Accordingly, Laclede Gas does not expect any adverse earnings impact as a result of the use of these derivative instruments. The Utility does not designate these instruments as hedging instruments under SFAS No. 133 because gains or losses associated with the use of these derivative instruments are deferred and recorded as regulatory assets or regulatory liabilities pursuant to SFAS No. 71, “Accounting for the Effects of Certain Types of Regulation,” and, as a result, have no direct impact on the Statements of Consolidated Income. The timing of the operation of the PGA clause may cause interim variations in short-term cash flows because the Utility is subject to cash margin requirements associated with changes in the values of these instruments. Nevertheless, carrying costs associated with such requirements are recovered through the PGA Clause.

From time to time, Laclede Gas purchases NYMEX futures contracts to help stabilize operating costs associated with forecasted purchases of gasoline and diesel fuels used to power vehicles and equipment used in the course of its business. At March 31, 2009, Laclede Gas held 0.8 million gallons of gasoline futures contracts at an average price of $1.32 per gallon and 0.1 million gallons of heating oil futures contracts (to hedge diesel fuel purchases) at an average price of $1.26 per gallon. Most of these futures contracts, the longest of which extends to 2010, are designated as cash flow hedges of forecasted transactions pursuant to SFAS No. 133. The gains or losses on these derivative instruments are not subject to the Utility’s PGA Clause.

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In the course of its business, Laclede Group’s non-regulated gas marketing affiliate, Laclede Energy Resources, Inc. (LER), enters into commitments associated with the purchase or sale of natural gas. Most of LER’s derivative natural gas contracts are designated as normal purchases or normal sales and, as such, are excluded from the scope of SFAS No. 133 and are accounted for as executory contracts on an accrual basis. Any of LER’s derivative natural gas contracts that are not designated as normal purchases or normal sales are accounted for at fair value pursuant to SFAS No. 133. At March 31, 2009, LER had 2.3 million MMBtu of non-exchange traded natural gas commodity contracts for which the normal purchases and normal sales scope exception was not elected, all of which extend to April 2009. These contracts have not been designated as hedges; therefore, changes in the fair value of these contracts are reported in earnings each period. LER manages the price risk associated with its fixed-priced commitments by either closely matching the offsetting physical purchase or sale of natural gas at fixed prices or through the use of NYMEX futures contracts to lock in margins. At March 31, 2009, LER’s unmatched fixed-price positions were not material to Laclede Group’s financial position or results of operations. LER’s NYMEX natural gas futures contracts used to lock in margins are designated as cash flow hedges of forecasted transactions pursuant to SFAS No. 133.

Derivative instruments designated as cash flow hedges of forecasted transactions are recognized on the Consolidated Balance Sheets at fair value and the change in the fair value of the effective portion of these hedge instruments is recorded, net of tax, in Other Comprehensive Income (OCI). Accumulated Other Comprehensive Income (AOCI) is a component of Total Common Stock Equity. Amounts are reclassified from AOCI into earnings when the hedged items affect net income, using the same revenue or expense category that the hedged item impacts. Based on market prices at March 31, 2009, it is expected that approximately $6.6 million of pre-tax unrealized gains will be reclassified into the Consolidated Statement of Income during the next twelve months. The net amount of pre-tax gains recognized in earnings for the ineffective portion of cash flow hedges was $0.3 million for the quarter ended March 31, 2009 and $2.5 million for the six months ended March 31, 2009. The net amount of pre-tax losses recognized in earnings for the ineffective portion of cash flow hedges was $0.6 million for the quarter ended March 31, 2008 and $0.3 million for the six months ended March 31, 2008. Cash flows from hedging transactions are classified in the same category as the cash flows from the items that are being hedged in the Statements of Consolidated Cash Flows.

The Company’s derivative instruments consist primarily of NYMEX positions. The NYMEX is the primary national commodities exchange on which natural gas derivatives are traded. NYMEX-traded contracts are supported by the financial and credit quality of the clearing members of the NYMEX and have nominal credit risk. Open NYMEX natural gas futures positions at March 31, 2009 were as follows:

	Laclede Gas Company			Laclede Energy Resources, Inc.
	MMBtu (millions)	Avg. Price Per MMBtu		MMBtu (millions)	Avg. Price Per MMBtu
Open short futures positions
Fiscal 2009				0.76	$	6.97
Fiscal 2010				2.35		6.56
Open long futures positions
Fiscal 2009	8.53	$	8.59	0.12	$	9.56
Fiscal 2010	14.55		8.78
Fiscal 2011	6.58		8.55
Fiscal 2012	0.60		8.31

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At March 31, 2009, Laclede Gas also had 17.5 million MMBtu of other price risk mitigation in place through the use of NYMEX natural gas option-based strategies.

The Effect of Derivative Instruments on the Statements of Consolidated Income and Comprehensive Income
(Thousands)	Three Months Ended March 31, 2009
Derivatives in SFAS No. 133 Cash Flow Hedging Relationships		Amount of Gain/(Loss) Recognized in OCI on Derivative (Effective Portion)		Location of Gain/(Loss) Reclassified from Accumulated OCI Into Income (Effective Portion)	Amount of Gain/(Loss) Reclassified from Accumulated OCI Into Income (Effective Portion)			Location of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion And Amount Excluded from Effectiveness Testing)	Amount of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
NYMEX natural gas contracts		$	4,896	Non-Regulated Gas Marketing Operating Revenues	$	4,410		Non-Regulated Gas Marketing Operating Revenues	$	182
				Non-Regulated Gas Marketing Operating Expenses		(2,115	)	Non-Regulated Gas Marketing Operating Expenses		67
NYMEX gasoline and heating oil contracts			106	Other Regulated Gas Distribution Operating Expenses		—		Other Regulated Gas Distribution Operating Expenses		31
Total		$	5,002		$	2,295			$	280

Derivatives Not Designated as Hedging Instruments under SFAS No. 133*	Location of Gain/(Loss) Recognized in Income on Derivative	Amount of Gain/(Loss) Recognized in Income on Derivative
Natural gas commodity contracts	Non-Regulated Gas Marketing Operating Revenues		$	164
NYMEX gasoline and heating oil contracts	Other Income and (Income Deductions) – Net			7
			$	171

* Gains and losses on Laclede Gas’ NYMEX natural gas derivative instruments, which are not designated as hedging instruments under SFAS No. 133, are deferred and recorded as regulatory assets or regulatory liabilities pursuant to SFAS No. 71. These gains and losses are excluded from the table above because they have no direct impact on the Consolidated Statement of Income.

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Fair Value of Derivative Instruments in the Consolidated Balance Sheet at March 31, 2009
	Asset Derivatives				Liability Derivatives
(Thousands)	Balance Sheet Location		Fair Value	*	Balance Sheet Location		Fair Value	*
Derivatives designated as hedging instruments under SFAS No. 133
NYMEX natural gas contracts	Derivative Instrument Assets	$	5,278		Derivative Instrument Assets	$	714
NYMEX gasoline and     heating oil contracts	Derivative Instrument Assets		137		Derivative Instrument Assets		—
Sub-total			5,415				714
Derivatives not designated as hedging instruments under SFAS No. 133
NYMEX natural gas contracts	Derivative Instrument Assets		5,099		Derivative Instrument Assets		112,215
Natural gas commodity     contracts	Derivative Instrument Assets		156		Other Current Liabilities		—
NYMEX gasoline and     heating oil contracts	Derivative Instrument Assets		7		Derivative Instrument Assets		—
Sub-total			5,262				112,215
Total derivatives		$	10,677			$	112,929

* The fair values of Asset Derivatives and Liability Derivatives exclude the fair value of cash margin receivables or payables with counterparties subject to netting arrangements. At March 31, 2009, the amounts excluded were $135.9 million in receivables and $3.0 million in payables, all of which were associated with NYMEX contracts. Fair value amounts of derivative contracts (including the fair value amounts of cash margin receivables and payables) for which there is a legal right to set off are presented net on the Consolidated Balance Sheet. As such, the gross balances presented in the table above are not indicative of the Company’s net economic exposure. Refer to Note 5, Fair Value Measurements, for information on the valuation of derivative instruments.

7. CONCENTRATIONS OF CREDIT RISK

A significant portion of LER’s revenues and related accounts receivable are from wholesale sales made to customers that are (or are associated with) major energy producers or utility companies. Such sales are typically made on an unsecured credit basis with payment due the month following delivery. These concentrations of sales to major energy producers and utility companies have the potential to affect the Company’s overall exposure to credit risk, either positively or negatively, in that each of these two groups of wholesale customers may be affected similarly by changes in economic, industry, or other conditions. To manage this risk, as well as credit risk from large customers in other industries, LER has established procedures to determine the creditworthiness of its customers. These include obtaining credit ratings and credit reports, analyzing customer financial statements to assess financial condition, and considering the industry environment in which the customer operates. This information is monitored on an ongoing basis. In some instances, LER may require credit assurances such as prepayments, letters of credit, or parental guarantees. In addition, LER may enter into netting arrangements to mitigate credit risk with counterparties in the energy industry from which LER both sells and purchases natural gas. Accounts receivable amounts are closely monitored and provisions for uncollectible amounts are accrued when losses are probable. To date, losses have not been significant. LER records accounts receivable, accounts payable, and prepayments for physical sales and purchases of natural gas on a gross basis. The amount included in accounts receivable attributable to major energy producers and their marketing affiliates amounted to $31.2 million, or 49.9% of LER’s total accounts receivable at March 31, 2009. Net receivable amounts from these customers on the same date, reflecting netting arrangements, were $14.1 million. Accounts receivable attributable to utility companies and their marketing affiliates comprised $10.3 million of LER’s total accounts receivable, or 16.4% at March 31, 2009 and net receivable amounts from these customers, reflecting netting arrangements, were $4.3 million.

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8. OTHER INCOME AND (INCOME DEDUCTIONS) – NET

	Three Months Ended						Six Months Ended
	March 31,						March 31,
(Thousands)	2009			2008			2009			2008
Interest income	$	663		$	1,047		$	1,802		$	2,820
Other income		926			183			1,337			720
Other income deductions		(1,342	)		(154	)		(2,153	)		185
Other Income and (Income Deductions) – Net	$	247		$	1,076		$	986		$	3,725

The decrease in Other Income and (Income Deductions) – Net for the quarter ended March 31, 2009, compared with the quarter ended March 31, 2008, was primarily due to the effect of a benefit from the reversal of certain tax-related expenses recognized during the quarter ended March 31, 2008 and lower interest income, partially offset by higher net investment income.

The decrease in Other Income and (Income Deductions) – Net for the six months ended March 31, 2009, compared with the six months ended March 31, 2008, was primarily due to lower interest income, higher net investment losses, and the effect of benefits recognized during the six months ended March 31, 2008 from the reversal of certain tax-related expenses and proceeds received related to the Company’s interest, as a policyholder, in the sale of a mutual insurance company.

9. INFORMATION BY OPERATING SEGMENT

All of Laclede Group’s subsidiaries are wholly owned. The Regulated Gas Distribution segment consists of the regulated operations of Laclede Gas and is the core business segment of Laclede Group. Laclede Gas is a public utility engaged in the retail distribution and sale of natural gas serving an area in eastern Missouri, with a population of approximately 2.1 million, including the City of St. Louis and parts of ten other counties in eastern Missouri. The Non-Regulated Gas Marketing segment includes the results of LER, a subsidiary engaged in the non-regulated marketing of natural gas and related activities. Other includes Laclede Pipeline Company’s transportation of liquid propane regulated by the Federal Energy Regulatory Commission (FERC) as well as non-regulated activities, including real estate development, the compression of natural gas, and financial investments in other enterprises. These operations are conducted through five subsidiaries. Other also includes Laclede Gas’ non-regulated merchandise sales business. Certain intersegment revenues with Laclede Gas are not eliminated in accordance with the provisions of SFAS No. 71. Those types of transactions include sales of natural gas from Laclede Gas to LER, sales of natural gas from LER to Laclede Gas, and transportation services provided by Laclede Pipeline Company to Laclede Gas. These revenues are shown on the Intersegment Revenues lines in the table under Regulated Gas Distribution, Non-Regulated Gas Marketing, and Other columns, respectively.

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			Non-
	Regulated		Regulated				Unallocated
	Gas		Gas				&
(Thousands)	Distribution		Marketing		Other		Eliminations			Consolidated
Three Months Ended
March 31, 2009
Revenues from external
customers	$	440,173	$	210,069	$	752	$	—		$	650,994
Intersegment revenues		295		7,520		259		—			8,074
Total Operating Revenues		440,468		217,589		1,011		—			659,068
Income from continuing
operations		22,170		8,498		143		—			30,811
Total assets of continuing
operations		1,609,714		170,656		131,667		(127,081	)		1,784,956
Six Months Ended
March 31, 2009
Revenues from external
customers	$	796,796	$	515,202	$	1,607	$	—		$	1,313,605
Intersegment revenues		1,773		17,427		519		—			19,719
Total Operating Revenues		798,569		532,629		2,126		—			1,333,324
Income from continuing
operations		38,318		23,199		600		—			62,117
Total assets of continuing
operations		1,609,714		170,656		131,667		(127,081	)		1,784,956
Three Months Ended
March 31, 2008
Revenues from external
customers	$	507,031	$	237,748	$	971	$	—		$	745,750
Intersegment revenues		58		1,639		259		—			1,956
Total Operating Revenues		507,089		239,387		1,230		—			747,706
Income (Loss) from continuing
operations		25,331		4,861		38		(170	)		30,060
Total assets of continuing
operations		1,454,369		152,256		175,976		(76,737	)		1,705,864
Six Months Ended
March 31, 2008
Revenues from external
customers	$	826,705	$	416,408	$	2,011	$	—		$	1,245,124
Intersegment revenues		1,276		4,777		519		—			6,572
Total Operating Revenues		827,981		421,185		2,530		—			1,251,696
Income (Loss) from continuing
operations		41,078		10,515		267		(264	)		51,596
Total assets of continuing
operations		1,454,369		152,256		175,976		(76,737	)		1,705,864

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10. COMMITMENTS AND CONTINGENCIES

Commitments

Laclede Gas and LER have entered into various contracts, expiring on dates through 2017, for the storage, transportation, and supply of natural gas. Minimum payments required under the contracts in place at March 31, 2009 are estimated at approximately $1.6 billion. Additional contracts are generally entered into prior to or during the heating season. Laclede Gas recovers its costs from customers in accordance with the PGA Clause.

Leases and Guarantees

Laclede Gas has several operating leases for the rental of vehicles that contain provisions requiring Laclede Gas to guarantee certain amounts related to the residual value of the leased property. These leases have various terms, the longest of which extends into 2014. At March 31, 2009, the maximum guarantees under these leases are $1.8 million. As of March 31, 2009, the Utility believes that it is unlikely that it will be subject to the maximum payment amount because it estimates that the residual value of the leased vehicles will be adequate to satisfy most of the guaranteed amounts. At March 31, 2009, the carrying value of the liability recognized for these guarantees was $0.3 million.

Laclede Group had guarantees totaling $82.5 million for performance and payment of certain wholesale gas supply purchases by LER, as of March 31, 2009. Since that date, total guarantees issued by Laclede Group on behalf of LER increased by $6.0 million bringing the total to $88.5 million in guarantees outstanding at April 29, 2009. No amounts have been recorded for these guarantees in the financial statements. As of March 31, 2009, management believes the probability is low that Laclede Group will be required to make payments under these guarantees.

Contingencies and Indemnifications

Laclede Gas owns and operates natural gas distribution, transmission, and storage facilities, the operations of which are subject to various environmental laws, regulations, and interpretations. While environmental issues resulting from such operations arise in the ordinary course of business, such issues have not materially affected the Company’s or Laclede Gas’ financial position and results of operations. As environmental laws, regulations, and their interpretations change, however, Laclede Gas may be required to incur additional costs. See Note 15 to the Consolidated Financial Statements included in the Company’s Fiscal Year 2008 Form 10-K for information relative to environmental matters generally.

As reported in the Company’s Form 10-K for the fiscal year ended September 30, 2008, Laclede Gas has identified three sites on which manufactured gas plant operations took place where the Utility faces the risk of environmental liabilities. One site is currently owned by an agency of the City of Saint Louis (the owner agency). An affiliated City agency (the development agency) has selected a developer with whom it is negotiating a final site development contract which contemplates remediation and redevelopment of the property. In conjunction with the redevelopment, Laclede Gas and another former site owner have entered into an agreement with the owner and development agencies as well as their parent agency, the private developer of the property, and an environmental consultant (Remediation Agreement). Under the Remediation Agreement, the development agency and the private developer agreed to remediate the site, and Laclede Gas and the other former owner are to be released by the involved City agencies, the private developer, and the environmental consultant from certain liabilities for the past and current environmental condition of the property. Also under that agreement Laclede Gas and the former site owner agreed to pay, at the closing of the transaction, a small percentage of the cost of remediation (subject to a maximum amount). The transactions contemplated by the Remediation Agreement are expected to close during the fourth quarter of fiscal year 2009. The amount Laclede Gas expects to pay under the Remediation Agreement is not material and will not have a material impact on the future financial condition or results of operations of Laclede Gas or the Company.

On December 28, 2006, the MoPSC Staff proposed a disallowance of $7.2 million related to Laclede Gas’ recovery of its purchased gas costs applicable to fiscal 2005. On September 14, 2007, the Staff withdrew its pursuit of $5.5 million of the disallowance it had originally proposed. The remaining $1.7 million pertains to Laclede Gas’ purchase of gas from its marketing affiliate, LER. Laclede Gas believes that the remaining portion of the proposed disallowance lacks merit and is vigorously opposing the adjustment in proceedings before the MoPSC. As such, no amount has been recorded in the financial statements for this proposed disallowance.

The MoPSC Staff has also proposed disallowances of gas costs relating to Laclede Gas purchases of gas supply from LER for fiscal years 2006 and 2007. On December 31, 2007, the MoPSC Staff proposed a disallowance of $2.8 million applicable to fiscal 2006, and on December 31, 2008, the MoPSC Staff proposed a disallowance of $1.5 million applicable to fiscal 2007. Laclede Gas believes that these proposed disallowances also lack merit and is vigorously opposing them in proceedings before the MoPSC. As such, no amount has been recorded in the financial statements for these proposed disallowances.

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In the December 31, 2007 filing, the MoPSC Staff also raised questions regarding whether certain sales and capacity release transactions subject to the FERC’s oversight were consistent with the FERC’s regulations and policies regarding capacity release. The Company commenced an internal review of the questions raised by the MoPSC Staff and notified the FERC Staff that it took this action. Subsequently, as a result of the internal review, the Company has provided the FERC Staff with a report regarding compliance of sales and capacity release activities with the FERC’s regulations and policies. On July 23, 2008, the FERC Staff requested additional information which the Company provided on August 22, 2008 and September 2, 2008. On February 11, 2009, the FERC Staff submitted follow-up questions to the Company’s August and September 2008 responses, to which the Company responded on February 25, 2009. On March 2, 2009, FERC Staff requested clarification of certain aspects of the Company’s February 25, 2009 response, which the Company clarified on March 4, 2009.

As reported in Note 2, Discontinued Operations, during the quarter ended March 31, 2008, the Company sold 100% of its interest in its wholly-owned subsidiary SM&P. The sales agreement (Agreement) includes representations and warranties customary for such transactions, including, among others, representations and warranties of the parties as to brokers’ fees; of SM&P as to its financial status, contracts, title to and condition of personal and real property, taxes, legal compliance, environmental matters, employee benefits, and intellectual property. The Agreement also includes customary indemnification provisions under which Laclede’s aggregate indemnification obligations are limited to a maximum of $7.0 million for most claims. Obligations subject to this maximum apply only in the event claims exceed a stated deductible, both individually and in the aggregate. However, this maximum limitation and deductible do not apply to obligations associated with taxes, employee benefits, title to personal property, and certain other fundamental representations and warranties. A maximum potential future payment amount cannot be estimated for these obligations. The terms of the indemnifications in the Agreement are generally dependent upon the statute of limitations applicable to the particular representations and warranties made by the Company, although certain representations and warranties have an indefinite life under the Agreement. As of March 31, 2009, the carrying amount of the liability recognized for these indemnification obligations was $0.2 million, based on the Company’s assessment of risk, which is believed to be low.

Laclede Group is involved in other litigation, claims, and investigations arising in the normal course of business. While the results of such litigation cannot be predicted with certainty, management, after discussion with counsel, believes that the final outcome will not have a material adverse effect on the consolidated financial position or results of operations of the Company.

Laclede Gas Company’s Financial Statements and Notes to Financial Statements are included in Exhibit 99.1 to this report.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE LACLEDE GROUP, INC.

This management’s discussion analyzes the financial condition and results of operations of The Laclede Group, Inc. (Laclede Group or the Company) and its subsidiaries. It includes management’s view of factors that affect its business, explanations of past financial results including changes in earnings and costs from the prior year periods, and their effects on overall financial condition and liquidity.

Certain matters discussed in this report, excluding historical information, include forward-looking statements. Certain words, such as “may,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “seek,” and similar words and expressions identify forward-looking statements that involve uncertainties and risks. Future developments may not be in accordance with our expectations or beliefs and the effect of future developments may not be those anticipated. Among the factors that may cause results to differ materially from those contemplated in any forward-looking statement are:

• weather conditions and catastrophic events, particularly severe weather in the natural gas producing areas of the country;

• volatility in gas prices, particularly sudden and sustained changes in natural gas prices, including the related impact on margin deposits associated with the use of natural gas derivative instruments;

• the impact of higher natural gas prices on our competitive position in relation to suppliers of alternative heating sources, such as electricity;

• changes in gas supply and pipeline availability; particularly those changes that impact supply for and access to our market area;

• legislative, regulatory and judicial mandates and decisions, some of which may be retroactive, including those affecting

• allowed rates of return

• incentive regulation

• industry structure

• purchased gas adjustment provisions

• rate design structure and implementation

• franchise renewals

• environmental or safety matters

• taxes

• pension and other postretirement benefit liabilities and funding obligations

• accounting standards;

• the results of litigation;

• retention of, ability to attract, ability to collect from, and conservation efforts of, customers;

• capital and energy commodity market conditions, including the ability to obtain funds with reasonable terms for necessary capital expenditures and general operations and the terms and conditions imposed for obtaining sufficient gas supply;

• discovery of material weakness in internal controls; and

• employee workforce issues.

Readers are urged to consider the risks, uncertainties, and other factors that could affect our business as described in this report. All forward-looking statements made in this report rely upon the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. We do not, by including this statement, assume any obligation to review or revise any particular forward-looking statement in light of future events.

The Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company’s Consolidated Financial Statements and the Notes thereto.

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THE LACLEDE GROUP, INC.

RESULTS OF OPERATIONS

Laclede Group’s earnings are primarily derived from the regulated activities of its largest subsidiary, Laclede Gas Company (Laclede Gas or the Utility), Missouri’s largest natural gas distribution company. Laclede Gas is regulated by the Missouri Public Service Commission (MoPSC or Commission) and serves the City of St. Louis and parts of ten other counties in eastern Missouri. Laclede Gas delivers natural gas to retail customers at rates and in accordance with tariffs authorized by the MoPSC. The Utility’s earnings are primarily generated by the sale of heating energy. The Utility’s weather mitigation rate design lessens the impact of weather volatility on Laclede Gas customers during cold winters and stabilizes the Utility’s earnings by recovering fixed costs more evenly during the heating season. Due to the seasonal nature of the business of Laclede Gas, Laclede Group’s earnings are seasonal in nature and are typically concentrated in the November through April period, which generally corresponds with the heating season.

On March 31, 2008, the Company completed the sale of 100% of its interest in its wholly-owned subsidiary SM&P Utility Resources, Inc. (SM&P) to Stripe Acquisition, Inc. (an affiliate of Kohlberg Management VI, LLC) for $85 million in cash, subject to certain closing and post-closing adjustments. SM&P is an underground facilities locating and marking business that formerly comprised Laclede Group’s Non-Regulated Services operating segment. The sales agreement included representations, warranties, and indemnification provisions customary for such transactions and was filed as an exhibit to the March 31, 2008 Form 10-Q. In accordance with generally accepted accounting principles, the results of operations for SM&P are reported as discontinued operations in the Consolidated Statements of Income.

Laclede Energy Resources, Inc. (LER) is engaged in the marketing of natural gas and related activities on a non-regulated basis. LER markets natural gas to both on-system Utility transportation customers and customers outside of Laclede Gas’ traditional service territory, including large retail and wholesale customers. As such, LER’s operations and customer base are subject to fluctuations in market conditions.

Other subsidiaries provide less than 10% of consolidated revenues.

Laclede Group’s strategy continues to include efforts to improve the performance of its core Utility, while developing non-regulated businesses and taking a measured approach in the pursuit of additional growth opportunities that complement the Utility business.

As for the Utility, mitigating the impact of weather fluctuations on Laclede Gas customers while improving the ability to recover its authorized distribution costs and return continues to be a fundamental component of Laclede Group’s strategy. The Utility’s distribution costs are the essential, primarily fixed expenditures it must incur to operate and maintain a more than 16,000 mile natural gas distribution system and related storage facilities. With regard to the storage facilities owned by Laclede Gas, management is currently undertaking an evaluation of the Utility’s natural gas storage field, which was developed more than 50 years ago, to assess the field’s current and future capabilities. In addition, Laclede Gas is working continually to improve its ability to provide reliable natural gas service at a reasonable cost, while maintaining and building a secure and dependable infrastructure. The settlement of the Utility’s 2007 rate case resulted in enhancements to the Utility’s weather mitigation rate design that better ensures the recovery of its fixed costs and margins despite variations in sales volumes due to the impacts of weather and other factors that affect customer usage. The Utility’s income from off-system sales remains subject to fluctuations in market conditions. Effective October 1, 2007, the Utility is allowed to retain 15% to 25% of the first $6 million in annual income earned (depending on the level of income earned) and 30% of income exceeding $6 million annually. Some of the factors impacting the level of off-system sales include the availability and cost of the Utility’s natural gas supply, the weather in its service area, and the weather in other markets. When Laclede Gas’ service area experiences warmer-than-normal weather while other markets experience colder weather or supply constraints, some of the Utility’s natural gas supply is available for off-system sales and there may be a demand for such supply in other markets.

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Laclede Gas continues to work actively to reduce the impact of higher costs associated with wholesale natural gas prices by strategically structuring its natural gas supply portfolio and through the use of derivative instruments. Nevertheless, the overall cost of purchased gas remains subject to fluctuations in market conditions. The Utility’s Purchased Gas Adjustment (PGA) Clause allows Laclede Gas to flow through to customers, subject to prudence review, the cost of purchased gas supplies, including costs, cost reductions, and related carrying costs associated with the use of derivative instruments to hedge the purchase price of natural gas, as well as gas inventory carrying costs. The Utility believes it will continue to be able to obtain sufficient gas supply. High natural gas prices and other economic conditions may affect sales volumes (due to the conservation efforts of customers) and cash flows (associated with the timing of collection of gas costs and related accounts receivable from customers).

LER continues to focus on growing its markets on a long-term and sustainable basis by providing both on-system Utility transportation customers and customers outside of Laclede Gas’ traditional service area with another choice in non-regulated natural gas suppliers. LER is working to assemble the team, technology, and resources necessary to expand its geographic service area and the range of services that it now provides. Nevertheless, income from LER’s operations is subject to fluctuations in market conditions.

Quarter Ended March 31, 2009

Earnings

Overview – Net Income (Loss) by Operating Segment	Quarter Ended
	March 31,
(Millions, after-tax)		2009		2008
Regulated Gas Distribution	$	22.2	$	25.3
Non-Regulated Gas Marketing		8.5		4.9
Other		0.1		(0.1	)
Income from Continuing Operations		30.8		30.1
Income from Discontinued Operations		—		21.3
Net Income	$	30.8	$	51.4

Laclede Group’s consolidated net income was $30.8 million for the quarter ended March 31, 2009, compared with $51.4 million for the quarter ended March 31, 2008. Basic and diluted earnings per share for the quarter ended March 31, 2009 were $1.41 and $1.40, respectively, compared with basic and diluted earnings per share of $2.38 and $2.37, respectively, reported for the same quarter last year. The decrease was primarily due to the effect of the one-time gain realized on the sale of SM&P on March 31, 2008. Basic and diluted earnings per share for the quarter ended March 31, 2008 included $0.99 and $0.98, respectively, attributable to the sale and operations of SM&P. This effect was partially offset by higher year-over-year income from continuing operations.

Income from Continuing Operations

Laclede Group’s income from continuing operations was $30.8 million for the quarter ended March 31, 2009, compared with $30.1 million for the quarter ended March 31, 2008. Basic and diluted earnings per share from continuing operations were $1.41 and $1.40, respectively, for the quarter ended March 31, 2009, compared with basic and diluted earnings per share of $1.39 for the quarter ended March 31, 2008. Earnings per share increased compared to last year primarily due to improved results reported by Laclede Group’s Non-Regulated Gas Marketing segment, partially offset by lower earnings recorded by Laclede Group’s Regulated Gas Distribution segment. Variations in income from continuing operations were primarily attributable to the factors described below.

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Regulated Gas Distribution net income decreased by $3.1 million for the quarter ended March 31, 2009, compared with the quarter ended March 31, 2008. The decrease in net income was primarily due to the following factors, quantified on a pre-tax basis:

• increases in operation and maintenance expenses, excluding the provision for uncollectible accounts, totaling $4.0 million; and,

• the effect of the recognition of previously unrecognized tax benefits and the reversal of related expenses recorded during the quarter ended March 31, 2008, totaling $1.1 million.

These factors were partially offset by:

• a lower provision for uncollectible accounts totaling $1.3 million;

• higher income from off-system sales and capacity release totaling $1.0 million; and,

• higher Infrastructure System Replacement Surcharge (ISRS) revenues totaling $0.9 million.

The Non-Regulated Gas Marketing segment reported an increase in earnings of $3.6 million compared with the same period last year. This increase was primarily due to LER’s higher margins on sales of natural gas, which resulted partly from depressed supply prices in the Mid-continent due to increased shale gas supply production and pipeline constraints, and increased sales volumes, primarily attributable to significantly increased firm pipeline transportation capacity. These factors were partially offset by the effect of a benefit from the reversal of certain tax-related expenses totaling $1.4 million during the quarter ended March 31, 2008.

Regulated Gas Distribution Operating Revenues

Laclede Gas passes on to Utility customers (subject to prudence review) increases and decreases in the wholesale cost of natural gas in accordance with its PGA Clause. The volatility of the wholesale natural gas market results in fluctuations from period to period in the recorded levels of, among other items, revenues and natural gas cost expense. Nevertheless, increases and decreases in the cost of gas associated with system gas sales volumes have no direct effect on net revenues and net income.

Regulated Gas Distribution Operating Revenues for the quarter ended March 31, 2009 were $440.5 million, or $66.6 million less than the same period last year. Temperatures experienced in the Utility’s service area during the quarter were 9.3% warmer than the same quarter last year and 6.2% warmer than normal. Total system therms sold and transported were 0.40 billion for the quarter ended March 31, 2009 compared with 0.45 billion for the same period last year. Total off-system therms sold and transported were 0.08 billion for the quarter ended March 31, 2009 compared with 0.06 billion for the same period last year. The decrease in Regulated Gas Distribution Operating Revenues was primarily attributable to the following factors:

(Millions)
Lower system sales volumes and other variations	$	(43.8	)
Lower prices charged for off-system sales		(38.3	)
Higher off-system sales volumes		24.5
Lower wholesale gas costs passed on to Utility customers (subject to prudence review by the MoPSC)		(9.9	)
Higher ISRS revenues		0.9
Total Variation	$	(66.6	)

29

Regulated Gas Distribution Operating Expenses

Regulated Gas Distribution Operating Expenses for the quarter ended March 31, 2009 decreased $61.9 million from the same quarter last year. Natural and propane gas expense decreased $64.0 million, or 17.0%, from last year’s level, primarily attributable to decreased volumes purchased for sendout, lower rates charged by our suppliers, and lower off-system gas expense. Other operation and maintenance expenses increased $2.7 million, or 6.0%, primarily due to higher maintenance charges, increases in compensation expenses, and higher group insurance charges, partially offset by a lower provision for uncollectible accounts. Taxes, other than income taxes, decreased $1.0 million, or 3.6%, primarily due to decreased gross receipts taxes (attributable to lower revenues).

Non-Regulated Gas Marketing Operating Revenues and Operating Expenses

Non-Regulated Gas Marketing Operating Revenues decreased $21.8 million primarily due to decreased per unit gas sales prices by LER, partially offset by 53.5% higher sales volumes. The decrease in Non-Regulated Gas Marketing Operating Expenses totaling $29.5 million was primarily associated with lower prices charged by suppliers, partially offset by increased volumes purchased.

Other Income and (Income Deductions) - Net

Other Income and (Income Deductions) – Net decreased $0.8 million primarily due to the effect of a benefit from the reversal of certain tax-related expenses, pursuant to Financial Accounting Standards Board Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes,” during the quarter ended March 31, 2008 and lower interest income, partially offset by higher net investment income.

Interest Charges

The $0.3 million increase in interest charges was primarily due to higher interest on long-term debt, primarily attributable to the issuance of $80.0 million principal amount of 6.35% First Mortgage Bonds on September 23, 2008. This increase was largely offset by lower interest on short-term debt. Average short-term interest rates were 1.0% for the quarter ended March 31, 2009 compared with 4.1% for the quarter ended March 31, 2008. Average short-term borrowings were $256.7 million for the quarter ended March 31, 2009 compared with $217.5 million for the quarter ended March 31, 2008.

Income Taxes

The $1.5 million increase in income taxes was primarily due to higher pre-tax income and the recognition of previously unrecognized tax benefits recorded during the quarter ended March 31, 2008, pursuant to FIN 48.

Six Months Ended March 31, 2009

Earnings

Overview – Net Income by Operating Segment	Six Months Ended
	March 31,
(Millions, after-tax)		2009		2008
Regulated Gas Distribution	$	38.4	$	41.1
Non-Regulated Gas Marketing		23.2		10.5
Other		0.5		—
Income from Continuing Operations		62.1		51.6
Income from Discontinued Operations		—		20.7
Net Income	$	62.1	$	72.3

Laclede Group’s consolidated net income was $62.1 million for the six months ended March 31, 2009, compared with $72.3 million for the six months ended March 31, 2008. Basic and diluted earnings per share were $2.84 and $2.82, respectively, for the six months ended March 31, 2009 compared with basic and diluted earnings per share of $3.35 and $3.34, respectively, reported for the same period last year. Earnings per share decreased due to the effect of the gain on sale and operations of SM&P totaling $0.96 per share (basic and diluted), for the six months ended March 31, 2008. This effect was partially offset by increased income from continuing operations.

30

Income from Continuing Operations

Laclede Group’s income from continuing operations was $62.1 million for the six months ended March 31, 2009, compared with $51.6 million for the six months ended March 31, 2008. Basic and diluted earnings per share from continuing operations were $2.84 and $2.82, respectively, for the six months ended March 31, 2009, compared with basic and diluted earnings per share of $2.39 and $2.38, respectively, for the six months ended March 31, 2008. Earnings per share increased compared to last year primarily due to improved results reported by Laclede Group’s Non-Regulated Gas Marketing segment, partially offset by lower earnings recorded by Laclede Group’s Regulated Gas Distribution segment. Variations in income from continuing operations were primarily attributable to the factors described below.

Regulated Gas Distribution net income decreased by $2.7 million for the six months ended March 31, 2009, compared with the six months ended March 31, 2008. The decrease in net income was primarily due to the following factors, quantified on a pre-tax basis:

• increases in operation and maintenance expenses, excluding the provision for uncollectible accounts, totaling $5.2 million; and,

• the effect of the recognition of previously unrecognized tax benefits and the reversal of related expenses recorded during the six months ended March 31, 2008, totaling $1.1 million.

These factors were partially offset by:

• higher ISRS revenues totaling $1.7 million;

• higher income from off-system sales and capacity release totaling $1.2 million; and,

• a lower provision for uncollectible accounts totaling $1.1 million.

The Non-Regulated Gas Marketing segment reported an increase in earnings of $12.7 million compared with the same period last year. This increase was primarily due to LER’s increased sales volumes primarily attributable to significantly increased firm pipeline transportation capacity and higher margins on sales of natural gas, which resulted partly from depressed supply prices in the Mid-continent due to increased shale gas supply production and pipeline constraints. These factors were partially offset by the effect of a benefit from the reversal of certain tax-related expenses totaling $1.4 million during the six months ended March 31, 2008.

Regulated Gas Distribution Operating Revenues

Regulated Gas Distribution Operating Revenues for the six months ended March 31, 2009 were $798.6 million, or $29.4 million less than the same period last year. Temperatures experienced in the Utility’s service area during the six months ended March 31, 2009 were 0.8% warmer than the same period last year and 1.7% warmer than normal. Total system therms sold and transported were 0.71 billion for the six months ended March 31, 2009 compared with 0.72 billion for the same period last year. Total off-system therms sold and transported were 0.12 billion for the six months ended March 31, 2009 compared with 0.11 billion for the same period last year. The decrease in Regulated Gas Distribution Operating Revenues was primarily attributable to the following factors:

(Millions)
Lower prices charged for off-system sales	$	(36.5	)
Higher off-system sales volumes		12.8
Lower system sales volumes and other variations		(5.8	)
Higher ISRS revenues		1.7
Lower wholesale gas costs passed on to Utility customers (subject to prudence review by the MoPSC)		(1.6	)
Total Variation	$	(29.4	)

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Regulated Gas Distribution Operating Expenses

Regulated Gas Distribution Operating Expenses for the six months ended March 31, 2009 decreased $26.4 million from the same period last year. Natural and propane gas expense decreased $32.0 million, or 5.3%, from last year’s level, primarily attributable to lower off-system gas expense, decreased volumes purchased for sendout, and lower rates charged by our suppliers. Other operation and maintenance expenses increased $4.1 million, or 4.7%, primarily due to higher maintenance charges, increases in compensation expenses, and higher group insurance charges, partially offset by a lower provision for uncollectible accounts.

Non-Regulated Gas Marketing Operating Revenues and Operating Expenses

Non-Regulated Gas Marketing Operating Revenues increased $111.4 million primarily due to 68.8% higher sales volumes, partially offset by decreased per unit gas sales prices by LER. The increase in Non-Regulated Gas Marketing Operating Expenses totaling $89.2 million was primarily associated with increased volumes purchased, partially offset by lower prices charged by suppliers.

Other Income and (Income Deductions) - Net

Other Income and (Income Deductions) – Net decreased $2.7 million primarily due to lower interest income, higher net investment losses, and the effect of benefits recognized during the six months ended March 31, 2008 from the reversal of certain tax-related expenses, pursuant to FIN 48, and proceeds received related to the Company’s interest, as a policyholder, in the sale of a mutual insurance company.

Interest Charges

The $0.3 million decrease in interest charges was primarily due to lower interest on short-term debt, largely offset by an increase in interest on long-term debt primarily attributable to the issuance of $80.0 million principal amount of 6.35% First Mortgage Bonds on September 23, 2008. Average short-term interest rates were 2.1% for the six months ended March 31, 2009 compared with 4.7% for the six months ended March 31, 2008. Average short-term borrowings were $259.7 million for the six months ended March 31, 2009 compared with $236.4 million for the six months ended March 31, 2008.

Income Taxes

The $6.9 million increase in income taxes was primarily due to higher pre-tax income and the effect of the recognition of previously unrecognized tax benefits recorded during the six months ended March 31, 2008 (pursuant to FIN 48), partially offset by the effects of various property-related items and a benefit associated with an amended return.

Labor Agreement

The Missouri Natural Division of Laclede Gas has a labor agreement with Local 884 of the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied-Industrial and Service Workers International Union, which represents approximately 5% of Laclede Gas’ employees. On April 15, 2009, a new four-year labor agreement was reached replacing the prior agreement which expired on that same date. The new agreement, which expires at midnight on April 14, 2013, includes revisions to the defined benefit pension plan formula, changes in wage rates and work rules, and other modifications that enable the Utility to provide high quality service to its customers and control operating costs while continuing to provide competitive wages, pension, and healthcare benefits to its employees.

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REGULATORY MATTERS

During fiscal 2006, the MoPSC approved permanent modifications to the Cold Weather Rule affecting the disconnection and reconnection practices of utilities during the winter heating season. Those modifications included provisions to allow the Utility to obtain accounting authorizations and defer for future recovery certain costs incurred with the modifications. During fiscal 2007, the Utility deferred for future recovery $2.7 million of costs associated with the fiscal 2007 heating season. On October 31, 2007, the Utility filed for determination and subsequent recovery of the deferred amount. On November 16, 2007, the MoPSC directed the MoPSC Staff and the Missouri Office of Public Counsel (Public Counsel) to submit their positions regarding the Utility’s filing by February 28, 2008. On February 28, 2008, the Utility and the MoPSC Staff filed a Non-Unanimous Stipulation & Agreement in which these parties agreed to a recovery of $2.5 million of costs. The Non-Unanimous Stipulation & Agreement was opposed by Public Counsel, and a hearing in this matter was held before the Commission on March 31, 2008. On April 17, 2008, the Commission issued its Report and Order approving the $2.5 million cost recovery recommended by the Utility and the MoPSC Staff. Consistent with the approved amount, the Utility recorded a reduction in its deferral totaling $0.2 million during the quarter ended March 31, 2008. On May 29, 2008, Public Counsel appealed the MoPSC’s April 17 Order to the Cole County, Missouri Circuit Court. On January 6, 2009, the Court issued its judgment affirming the Commission’s order approving the Cold Weather Rule compliance cost amount that the Utility and Staff had recommended over Public Counsel’s objection. On February 9, 2009, Public Counsel appealed the Circuit Court’s affirmation of the MoPSC’s April 17, 2008 Order to the Court of Appeals for the Western District of Missouri.

On December 28, 2006, the MoPSC Staff proposed a disallowance of $7.2 million related to Laclede Gas’ recovery of its purchased gas costs applicable to fiscal 2005. On September 14, 2007, the Staff withdrew its pursuit of $5.5 million of the disallowance it had originally proposed. The remaining $1.7 million pertains to Laclede Gas’ purchase of gas from its marketing affiliate, LER. Laclede Gas believes that the remaining portion of the proposed disallowance lacks merit and is vigorously opposing the adjustment in proceedings before the MoPSC. As such, no amount has been recorded in the financial statements for this proposed disallowance.

The MoPSC Staff has also proposed disallowances of gas costs relating to Laclede Gas purchases of gas supply from LER for fiscal years 2006 and 2007. On December 31, 2007, the MoPSC Staff proposed a disallowance of $2.8 million applicable to fiscal 2006, and on December 31, 2008, the MoPSC Staff proposed a disallowance of $1.5 million applicable to fiscal 2007. Laclede Gas believes that these proposed disallowances also lack merit and is vigorously opposing them in proceedings before the MoPSC. As such, no amount has been recorded in the financial statements for these proposed disallowances.

In the December 31, 2007 filing, the MoPSC Staff also raised questions regarding whether certain sales and capacity release transactions, subject to the Federal Energy Regulatory Commission (FERC)’s oversight, were consistent with the FERC’s regulations and policies regarding capacity release. The Company commenced an internal review of the questions raised by the MoPSC Staff and notified the FERC Staff that it took this action. Subsequently, as a result of the internal review, the Company has provided the FERC Staff with a report regarding compliance of sales and capacity release activities with the FERC’s regulations and policies. On July 23, 2008, the FERC Staff requested additional information, which the Company provided on August 22, 2008 and September 2, 2008. On February 11, 2009, the FERC Staff submitted follow-up questions to the Company’s August and September 2008 responses, to which the Company responded on February 25, 2009. On March 2, 2009, FERC Staff requested clarification of certain aspects of the Company’s February 25, 2009 response, which the Company clarified on March 4, 2009.

On July 9, 2008, Laclede Gas made a tariff filing with the MoPSC that would make the payment provisions for the restoration of gas service under the Utility’s Cold Weather Rule available to customers in the summer of 2008 and enable the Utility to increase or decrease its PGA rates to correct for any shortfall or surplus created by the difference between the gas cost portion of the Utility’s actual net bad debt write-offs and the amount of such cost that is embedded in its existing rates. The MoPSC suspended the tariff on August 5, 2008 and established a procedural schedule to consider the Utility’s filing. As a result, the Cold Weather Rule portion of the filing is now moot. A formal hearing pertaining to the bad debt portion of the filing was held on January 5, 2009. On April 15, 2009, the Commission issued its Order rejecting the Utility’s tariffs. Laclede Gas has filed for rehearing of the Commission’s Order and is pursuing other alternatives for addressing this issue.

On November 21, 2008, the Utility made an ISRS filing with the Commission designed to increase revenues by $1.9 million annually. After the Utility updated the filing, on February 4, 2009, the MoPSC approved an annual increase of $2.1 million that became effective February 6, 2009. On April 28, 2009, the Utility made an ISRS filing with the Commission designed to increase revenues by $2.5 million annually. This filing is pending Commission approval.

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CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition, results of operations, liquidity, and capital resources is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. Generally accepted accounting principles require that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Our critical accounting policies used in the preparation of our Consolidated Financial Statements are described in Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2008 and include the following:

• Allowances for doubtful accounts

• Employee benefits and postretirement obligations

• Regulated operations

There were no significant changes to these critical accounting policies during the six months ended March 31, 2009. For discussion of other significant accounting policies, see Note 1 to the Consolidated Financial Statements included in the Company’s Form 10-K for the fiscal year ended September 30, 2008.

ACCOUNTING PRONOUNCEMENTS

The Company has evaluated or is in the process of evaluating the impact that recently issued accounting standards will have on the Company’s financial position or results of operations upon adoption. For disclosures related to the adoption of new accounting standards, see the New Accounting Standards section of Note 1 to the Consolidated Financial Statements.

FINANCIAL CONDITION

CREDIT RATINGS

As of March 31, 2009, credit ratings for outstanding securities for Laclede Group and Laclede Gas issues were as follows:

Type of Facility	S&P	Moody’s	Fitch
Laclede Group Issuer Rating	A		A-
Laclede Gas First Mortgage Bonds	A	A3	A+
Laclede Gas Commercial Paper	A-1	P-2	F1

The Company has investment grade ratings, and believes that it will have adequate access to the financial markets to meet its capital requirements. These ratings remain subject to review and change by the rating agencies.

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CASH FLOWS

The Company’s short-term borrowing requirements typically peak during colder months when Laclede Gas borrows money to cover the lag between when it purchases its natural gas and when its customers pay for that gas. Changes in the wholesale cost of natural gas (including cash payments for margin deposits associated with the Utility’s use of natural gas derivative instruments), variations in the timing of collections of gas cost under the Utility’s PGA Clause, the seasonality of accounts receivable balances, and the utilization of storage gas inventories cause short-term cash requirements to vary during the year and from year to year, and can cause significant variations in the Utility’s cash provided by or used in operating activities.

Net cash provided by operating activities for the six months ended March 31, 2009 was $98.8 million, compared with $130.8 million for the same period last year. The difference is primarily attributable to variations associated with the timing of collections of gas cost under the Utility’s PGA Clause, including the effects of this year’s increase in net cash payments for margin deposits associated with the Utility’s use of natural gas derivative instruments. Those variations were partially offset by increased LER operating cash flows (attributable to higher operating income) and a reduction in cash paid for income taxes this year.

Net cash used in investing activities for the six months ended March 31, 2009 was $28.0 million compared with net cash provided by investing activities of $55.5 million for the six months ended March 31, 2008. The variation is primarily attributable to the proceeds from the sale of SM&P recorded last year.

Net cash provided by financing activities was $8.0 million for the six months ended March 31, 2009 compared with net cash used in financing activities of $93.5 million for the six months ended March 31, 2008. The variation primarily reflects a net increase in the issuance of short-term debt this year and the effect of the maturity of long-term debt last year.

LIQUIDITY AND CAPITAL RESOURCES

Short-term Debt

As indicated above, the Company’s short-term borrowing requirements typically peak during the colder months. These short-term cash requirements can be met through the sale of commercial paper supported by lines of credit with banks or through direct use of the lines of credit. Laclede Gas has a syndicated line of credit in place of $320 million from 10 banks, with the largest portion provided by a single bank being 17.5%. This line expires in December 2011. In November 2008, the Utility established a seasonal line of credit of $75 million, which expired in March 2009. Including both lines of credit, the largest portion provided by a single bank was 26.8%. During the six months ended March 31, 2009, Laclede Gas utilized both its syndicated line of credit and commercial paper for short-term funding. Commercial paper outstanding at March 31, 2009 was $198.8 million, while outstanding bank line advances were $40.0 million. The weighted average interest rate on these short-term borrowings was 0.7% per annum at March 31, 2009. Based on total short-term borrowings at March 31, 2009, a change in interest rate of 100 basis points would increase or decrease pre-tax earnings and cash flows of Laclede Group by approximately $2.4 million on an annual basis. Portions of such increases or decreases may be offset through the application of PGA carrying costs. Although Laclede Gas borrowed funds from Laclede Group from time to time within the six months ended March 31, 2009, there were no such borrowings outstanding at the end of the period. The Utility had short-term borrowings (including borrowings from Laclede Group) aggregating to a maximum of $386.4 million at any one time during the six months ended March 31, 2009. Excluding borrowings from Laclede Group, the Utility’s maximum borrowings for the period were $309.9 million.

Laclede Gas’ lines of credit include covenants limiting total debt, including short-term debt, to no more than 70% of total capitalization and requiring earnings before interest, taxes, depreciation, and amortization (EBITDA) to be at least 2.25 times interest expense. On March 31, 2009, total debt was 60% of total capitalization. For the twelve months ended March 31, 2009, EBITDA was 3.88 times interest expense.

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Short-term cash requirements outside of Laclede Gas have generally been met with internally-generated funds. However, Laclede Group has $50 million in working capital lines of credit, $40 million of which expires in August 2009 and $10 million of which expires in October 2009, to meet short-term liquidity needs of its subsidiaries. These lines of credit have covenants limiting the total debt of the consolidated Laclede Group to no more than 70% of the Company’s total capitalization. This ratio stood at 54% on March 31, 2009. These lines have been used to provide for seasonal funding needs of various subsidiaries from time to time. There were no borrowings under Laclede Group’s lines during the six months ended March 31, 2009.

Long-term Debt

At March 31, 2009, Laclede Gas had fixed-rate long-term debt totaling $390 million. While these long-term debt issues are fixed-rate, they are subject to changes in fair value as market interest rates change. However, increases or decreases in fair value would impact earnings and cash flows only if Laclede Gas were to reacquire any of these issues in the open market prior to maturity.

Equity and Shelf Registrations

Laclede Gas has on file with the Securities and Exchange Commission (SEC) an effective shelf registration on Form S-3 for issuance of $350 million of First Mortgage Bonds, unsecured debt, and preferred stock, of which $270 million remains available to Laclede Gas at this time. The Utility has authority from the MoPSC to issue up to $500 million in First Mortgage Bonds, unsecured debt, and equity securities, of which $371.1 million remained available under this authorization as of March 31, 2009. During the six months ended March 31, 2009, pursuant to this authority, the Utility sold 1,198 shares of its common stock to Laclede Group for $41.3 million. The amount, timing, and type of additional financing to be issued will depend on cash requirements and market conditions.

Laclede Group has on file an automatic shelf registration on Form S-3 with the SEC that allows for the issuance of equity securities and debt securities. No securities have been issued under this registration statement, which expires November 26, 2011. The amount, timing, and type of financing to be issued under this shelf registration will depend on cash requirements and market conditions. In addition, Laclede Group has a registration statement on file on Form S-3 for the issuance and sale of up to 400,000 shares of its common stock under its Dividend Reinvestment and Stock Purchase Program. At March 31, 2009, there were 391,370 shares remaining available for issuance under this Form S-3.

On March 31, 2009, Laclede Gas redeemed all of its outstanding 5% Series B and 4.56% Series C preferred stock, totaling $0.6 million, at its par value of $25 per share in addition to the dividend paid on that same date.

Guarantees

Laclede Gas has several operating leases for the rental of vehicles that contain provisions requiring Laclede Gas to guarantee certain amounts related to the residual value of the leased property. These leases have various terms, the longest of which extends into 2014. At March 31, 2009, the maximum guarantees under these leases were $1.8 million. However, the Utility estimates that the residual value of the leased vehicles will be adequate to satisfy most of the guaranteed amounts. At March 31, 2009, the carrying value of the liability recognized for these guarantees was $0.3 million.

Laclede Group had guarantees totaling $82.5 million for performance and payment of certain wholesale gas supply purchases by LER, as of March 31, 2009. Since that date, total guarantees issued by Laclede Group on behalf of LER increased by $6.0 million bringing the total to $88.5 million in guarantees outstanding at April 29, 2009. No amounts have been recorded for these guarantees in the financial statements.

Other

Utility capital expenditures were $25.7 million for the six months ended March 31, 2009, compared with $26.4 million for the same period last year. Non-utility capital expenditures were $0.9 million for the six months ended March 31, 2009, compared with $1.3 million for the six months ended March 31, 2008.

Consolidated capitalization at March 31, 2009 consisted of 57.8% Laclede Group common stock equity and 42.2% Laclede Gas long-term debt.

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It is management’s view that the Company has adequate access to capital markets and will have sufficient capital resources, both internal and external, to meet anticipated capital requirements.

The seasonal nature of Laclede Gas’ sales affects the comparison of certain balance sheet items at March 31, 2009 and at September 30, 2008, such as Accounts receivable - net, Gas stored underground, Notes payable, Accounts payable, Regulatory assets and Regulatory liabilities, and Delayed and Advance customer billings. The Consolidated Balance Sheet at March 31, 2008 is presented to facilitate comparison of these items with the corresponding interim period of the preceding fiscal year.

CONTRACTUAL OBLIGATIONS

As of March 31, 2009, Laclede Group had contractual obligations with payments due as summarized below (in millions):

			Payments due by period
			Remaining						Fiscal Years
Contractual Obligations	Total		Fiscal Year 2009		Fiscal Years 2010-2011		Fiscal Years 2012-2013		2014 and thereafter
Principal Payments on Long-Term Debt	$	390.0	$	—	$	25.0	$	25.0	$	340.0
Interest Payments on Long-Term Debt		521.8		12.3		48.4		45.1		416.0
Operating Leases (a)		15.8		2.7		8.1		3.6		1.4
Purchase Obligations – Natural Gas (b)		1,625.4		287.8		826.7		466.8		44.1
Purchase Obligations – Other (c)		108.1		10.0		25.5		17.6		55.0
Total (d)	$	2,661.1	$	312.8	$	933.7	$	558.1	$	856.5

(a)	Operating lease obligations are primarily for office space, vehicles, and power operated equipment in the gas distribution segment. Additional payments will be incurred if renewal options are exercised under the provisions of certain agreements.
(b)	These purchase obligations represent the minimum payments required under existing natural gas transportation and storage contracts and natural gas supply agreements in the utility gas distribution and non-regulated gas marketing segments. These amounts reflect fixed obligations as well as obligations to purchase natural gas at future market prices, calculated using March 31, 2009 New York Mercantile Exchange (NYMEX) futures prices. Laclede Gas recovers the costs related to its purchases, transportation, and storage of natural gas through the operation of its PGA Clause, subject to prudence review; however, variations in the timing of collections of gas costs from customers affect short-term cash requirements. Additional contractual commitments are generally entered into prior to or during the heating season.
(c)	These purchase obligations reflect miscellaneous agreements for the purchase of materials and the procurement of services necessary for normal operations.
(d)	The categories of Capital Leases and Other Long-Term liabilities have been excluded from the table above because there are no applicable amounts of contractual obligations under these categories. Also, commitments related to pension and postretirement benefit plans have been excluded from the table above. The Company expects to make contributions to its qualified, trusteed pension plans totaling $1.5 million during the remainder of fiscal year 2009. Laclede Gas anticipates a $0.7 million contribution relative to its non-qualified pension plans during the remainder of fiscal year 2009. With regard to the postretirement benefits, the Company anticipates Laclede Gas will contribute $6.6 million to the qualified trusts and $0.2 million directly to participants from Laclede Gas’ funds during the remainder of fiscal year 2009. For further discussion of the Company’s pension and postretirement benefit plans, refer to Note 4, Pension Plans and Other Postretirement Benefits, of the Notes to Consolidated Financial Statements.

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MARKET RISK

Laclede Gas’ commodity price risk, which arises from market fluctuations in the price of natural gas, is primarily managed through the operation of its PGA Clause. The PGA Clause allows Laclede Gas to flow through to customers, subject to prudence review, the cost of purchased gas supplies. The Utility is allowed the flexibility to make up to three discretionary PGA changes during each year, in addition to its mandatory November PGA change, so long as such changes are separated by at least two months. The Utility is able to mitigate, to some extent, changes in commodity prices through the use of physical storage supplies and regional supply diversity. Laclede Gas also has a risk management policy that allows for the purchase of natural gas derivative instruments with the goal of managing its price risk associated with purchasing natural gas on behalf of its customers. This policy prohibits speculation. Costs and cost reductions, including carrying costs, associated with the Utility’s use of natural gas derivative instruments are allowed to be passed on to the Utility’s customers through the operation of its PGA Clause. Accordingly, Laclede Gas does not expect any adverse earnings impact as a result of the use of these derivative instruments. However, the timing of recovery for cash payments related to margin requirements may cause short-term cash requirements to vary. Nevertheless, carrying costs associated with such requirements, as well as other variations in the timing of collections of gas costs, are recovered through the PGA Clause. For more information about the Utility’s natural gas derivative instruments, see Note 6 to the Consolidated Financial Statements.

In the course of its business, Laclede Group’s non-regulated gas marketing affiliate, LER, enters into fixed price commitments associated with the purchase or sale of natural gas. As part of LER’s risk management policy, LER manages the price risk associated with these commitments by either closely matching the offsetting physical purchase or sale of natural gas at fixed prices or through the use of NYMEX futures contracts to lock in margins. At March 31, 2009, LER’s unmatched positions are not material to Laclede Group’s financial position or results of operations. For details related to LER’s derivatives and hedging activities, see Note 6 to the Consolidated Financial Statements.

LER has concentrations of credit risk in that a significant portion of its revenues and related accounts receivable are from wholesale sales made to customers that are (or are associated with) major energy producers or utility companies. These concentrations of sales to major energy producers and utility companies have the potential to affect the Company’s overall exposure to credit risk, either positively or negatively, in that each of these two groups of wholesale customers may be affected similarly by changes in economic, industry or other conditions. For more information on these concentrations of credit risk, including how LER manages these risks, see Note 7 to the Consolidated Financial Statements.

The Company is also subject to interest rate risk associated with its long-term and short-term debt issuances. Refer to the Liquidity and Capital Resources section of this Management’s Discussion and Analysis for information about the effect of changes in interest rates.

ENVIRONMENTAL MATTERS

Laclede Gas owns and operates natural gas distribution, transmission, and storage facilities, the operations of which are subject to various environmental laws, regulations, and interpretations. While environmental issues resulting from such operations arise in the ordinary course of business, such issues have not materially affected the Company’s or Laclede Gas’ financial position and results of operations. As environmental laws, regulations, and their interpretations change, however, Laclede Gas may be required to incur additional costs. For information relative to environmental matters, see Note 15 to the Consolidated Financial Statements included in the Company’s Form 10-K for the fiscal year ended September 30, 2008. For changes during the six months ended March 31, 2009, see Note 10 to the Consolidated Financial Statements of this report.

OFF-BALANCE SHEET ARRANGEMENTS

Laclede Group has no off-balance sheet arrangements.

Laclede Gas Company’s Management’s Discussion and Analysis of Financial Condition is included in Exhibit 99.1 of this report.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

For this discussion, see Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk, on page 38 of this report.

Item 4. Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15e and Rule 15d-15e under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

There have been no changes in our internal control over financial reporting that occurred during our second fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For a description of environmental matters and legal proceedings, see Note 15 to the Consolidated Financial Statements included in the Company’s Form 10-K for the fiscal year ended September 30, 2008 and Note 10 to the Consolidated Financial Statements of this report. For a description of pending regulatory matters of Laclede Gas, see Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Regulatory Matters, on page 33 of this report.

Laclede Group and its subsidiaries are involved in litigation, claims and investigations arising in the normal course of business. While the results of such litigation cannot be predicted with certainty, management, after discussion with counsel, believes that the final outcome will not have a material adverse effect on the consolidated financial position or results of operations of the Company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On February 10, 2009, the Board of Directors of Laclede Gas approved the sale of 11 shares of Laclede Gas common stock to Laclede Group. The proceeds from the sale, totaling $0.4 million were used to reduce short-term borrowings. Exemption from registration was claimed under Section 4(2) of the Securities Act of 1933.

Item 4. Submission of Matters to a Vote of Security Holders

The annual meeting of shareholders of The Laclede Group, Inc. was held on January 29, 2009. Below are the matters voted upon at the meeting.

The following individuals were elected to the Board of Directors of The Laclede Group:

Director	Votes in Favor	Votes Against
Arnold W. Donald	19,110,884	896,314
Anthony V. Leness	19,491,749	515,449
William E. Nasser	19,410,065	597,133

The other matters received the following votes:

Proposal	Votes In Favor	Votes Against	Abstain	Broker Non-Votes
Ratify appointment of Deloitte & Touche LLP as independent registered public accountant for fiscal year 2009	19,505,666	387,903	113,627	NA
Approve amendments to the Company’s Restricted Stock Plan for Non-Employee Directors	13,539,581	1,588,084	217,912	4,661,621

Item 5. Other Information

LER and CenterPoint Energy Gas Transmission Company on March 31, 2009 executed an amendment and restatement of the Firm (Rate Schedule FT) Transportation Service Agreement TSA No. 1006667 effective April 1, 2009. Under this amendment and restatement, the term of the contract was extended to October 31, 2013. The contract is included as exhibit 10.2 to this Form 10-Q.

Item 6. Exhibits

(a) See Exhibit Index

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.

		The Laclede Group, Inc.
Dated:	April 29, 2009	By:	/s/ Mark D. Waltermire
			Mark D. Waltermire
			Chief Financial Officer
			(Authorized Signatory and Chief Financial Officer)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.

		Laclede Gas Company
Dated:	April 29, 2009	By:	/s/ Mark D. Waltermire
			Mark D. Waltermire
			Senior Vice President and
			Chief Financial Officer
			(Authorized Signatory and Chief Financial Officer)

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INDEX TO EXHIBITS

Exhibit No.
10.1	-	Restricted Stock Plan for Non-Employee Directors as amended and effective January 29, 2009, incorporated by reference from appendix A to the Company’s proxy statement, filed December 22, 2008 (File No. 1-16681).
10.2	-	Amended and Restated Firm (Rate Schedule FT) Transportation Service Agreement between Laclede Energy Resources, Inc. and CenterPoint Energy Gas Transmission Company TSA #1006667.
12	-	Ratio of Earnings to Fixed Charges.
31	-	CEO and CFO Certifications under Exchange Act Rule 13a – 14(a).
32	-	CEO and CFO Section 1350 Certifications.
99.1	-	Laclede Gas Company - Financial Statements, Notes to Financial Statements, and Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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EX-10.2

Exhibit 10.2

AMENDED AND RESTATED

FIRM (RATE SCHEDULE FT)

TRANSPORTATION SERVICE AGREEMENT

TSA NO.  1006667

THIS TRANSPORTATION SERVICE AGREEMENT (“Agreement”), between CenterPoint Energy Gas Transmission Company (“CEGT”), a Delaware corporation (“Transporter”), and Shipper (defined below), covering the transportation of natural gas by Transporter on behalf of Shipper as more particularly described herein, is entered into in accordance with the following terms and conditions:

1)	SHIPPER INFORMATION:
	Laclede Energy Resources, Inc.
	720 Olive Street
	St. Louis, MO 63101
	Attn:  Scott Jaskowiak
	Phone:  (314) 516-8588
	Fax:  (314) 516-8551
	Email:  sjaskowiak@lacledeenergy.com
	Type of Entity:  Missouri corporation
	Transporter’s wire transfer information and addresses for notices and payments shall be located on Transporter’s Internet Web Site.
2)	REGULATORY AUTHORITY:				Subpart G
3)	TERM, CONTRACT DEMAND AND POINTS:
	The term, Contract Demand, Receipt Entitlements, if applicable, and Receipt and Delivery Points for this Agreement shall be as shown below.  Absent designation of MRO’s for any specific physical Point of Receipt, Transporter shall have no obligation to permit Shipper to utilize any such Point of Receipt or to receive any specific quantities on Shipper’s behalf at such point.
		Term:	Effective Date:			Originally November 5, 2008, as amended and restated April 1, 2009, subject to FERC approval
			Primary Term End Date:			The end of the Day of October 31, 2013
			Evergreen?			No
	Contract Demand:			75,000 Dth/D
	Receipt Entitlement(s):			Neutral Pooling Area:  75,000 Dth/D
	Primary Receipt Point(s):						Maximum Receipt Obligation (Dth/D)
	O-West Summary (Meter No. 805298)							64,000
	Scissortail Energy, LLC (Meter No. 012355)							11,000
	Primary Delivery Point(s):						Maximum Delivery Obligation (Dth/D)
	Columbia Gulf CP (Meter No. 13548)							60,000
	Trunkline CP (Meter No. 13546)							15,000
4)	RATE:  Unless provided otherwise in an Attachment A to this Agreement in effect during the term of this Agreement, in a capacity release award, or below, Shipper shall pay, or cause to be paid, to Transporter each month for all services provided hereunder the maximum applicable rate, and any other charges, fees, direct bill amounts, taxes, assessments, or surcharges provided for in Transporter’s Tariff, as on file and in effect from time to time, for each service rendered hereunder.  If Attachment A or this Agreement provides for a rate other than the maximum applicable rate, the following shall apply:

Page 1 of 6

AMENDED AND RESTATED

FIRM (RATE SCHEDULE FT)

TRANSPORTATION SERVICE AGREEMENT

TSA NO.  1006667

Shipper agrees to pay the rates specified below or on Attachment A for performance of certain gas transportation service under the Agreement.  These rates are applicable only in accordance with the following:
(a)	Term, Points and/or Rates: The term of the rates, and the Receipt Point(s) and the Delivery Point(s) eligible for such rates, shall be specified below.
		(i)	Negotiated Rate.
		(ii)	Description of Points:
			The Receipt Points eligible for the rates specified below shall be the points listed in Section 3 of the Agreement (as such agreement provided on the effective date hereof), and all generally available AIRPs and Pools in the Neutral Pooling Area, including Shipper’s East of Chandler Neutral Pool (when established).
			The Delivery Point eligible for the rates specified below shall be the Primary Delivery Points listed in Section 3 of the Agreement (as such Agreement provides on the effective date hereof) and the following Secondary Delivery Points:  all generally available Perryville Hub Delivery Points.
		(iii)	Description of Rates:
			The rate which Transporter shall bill and Shipper shall pay under the Agreement for services up to Contact Demand (as provided for on the effective date hereof) shall be achieved by adjusting, if required Transporter’s then effective applicable maximum Tariff rates to a level which yields a unit rate (“Transmission Allowance”) of $0.2528 per Dth, when calculated on an assumed 100% load factor basis, based on Shipper’s Contract Demand; the rate applicable to transportation between any points other than those set forth in (ii) above shall be the higher of the Transmission Allowance or the then applicable maximum Tariff rate.  The Transmission Allowance shall not be subject to refund or reduction if it exceeds the maximum Tariff rate.  Shipper hereby elects to be billed on a levelized basis to the extent Transporter so determined and such option is available under the tariff.
			Shipper shall pay a Reservation Charge each Month based on the Dth of Contract Demand, regardless of the quantity of gas transported during the Service Month.  The Reservation Charge (expressed as a unit rate on an assumed 100% load factor basis) will be calculated by subtracting the minimum applicable Base Commodity Rate from the Transmission Allowance.
		(iv)	Term of Rate:
			Begin Date(s):	April 1, 2009
			End Date(s):	October 31, 2013
(b)	Authorized Overrun:  Unless Transporter agrees otherwise, the rate for any authorized overrun quantities shall be the greater of the maximum Tariff rate or the rate described above.
(c)	General:  In consideration for Shipper’s continuing compliance with the provisions of the Agreement, the transportation rates and charges as defined above or on Attachment A for the specified services provided under the Agreement only apply to receipts from, and subsequent deliveries to, the Points of Receipt and Delivery, quantities and/or time periods described above or on Attachment A and to reserved capacity necessary to effect such service. In addition to any rate or amount referred to herein (including discounted rates, Negotiated Rates, overrun rates and maximum Tariff rates), Shipper shall provide or pay and Transporter shall retain or charge Fuel Use and LUFG allowances or charges (including the EPC surcharge) in such quantities or amounts as authorized from time to time by the Tariff and, except as specifically provided otherwise herein or on Attachment A, shall pay any applicable charges, penalties, surcharges, fees, taxes, assessments and/or direct billed amounts provided for in the Tariff.  In any event, the rate in any Month shall never be below Transporter’s applicable minimum Tariff rate for a discount rate transaction.  For a Negotiated

Page 2 of 6

AMENDED AND RESTATED

FIRM (RATE SCHEDULE FT)

TRANSPORTATION SERVICE AGREEMENT

TSA NO.  1006667

	Rate transaction, the rate in any month shall never be below Transporter’s applicable minimum Tariff rate, unless Transporter otherwise agrees.  Transporter shall not be responsible for the payment and satisfaction of any taxes assessed or levied on the receipt, transmission (and any activities in connection therewith), delivery, use and/or consumption with respect to Gas delivered or received by Shipper, unless Transporter agrees otherwise.
(d)	Rate-Related Provisions:
	(i)	Consideration for Rate Granted:  Transporter agrees to the rates specified herein or on Attachment A in exchange for Shipper’s agreement to forego credits or other benefits to which Shipper would otherwise be entitled, but only to the extent such credits or benefits would result in a greater economic benefit over the applicable term than that represented by the agreed-upon rate.  Accordingly, unless Transporter otherwise agrees, Shipper will not receive credits (with the exception of (1) penalty revenue credits provided pursuant to Section 31 of the General Terms and Conditions of Transporter’s Tariff, and (2) capacity release credits) from rates, refunds or other revenues collected by Transporter or Shipper if to do so would effectively result in a lower rate or greater economic benefit to Shipper; provided, however, that for a Shipper taking service under a Negotiated Rate agreement, Transporter and Shipper can agree pursuant to Section 19.8 of the General Terms and Conditions of Transporter’s Tariff that Transporter will retain some or all of the capacity release credits to the extent those credits exceed the amount of the Shipper’s invoiced  demand  component.  If  the  parties’ agreement to the foregoing is determined invalid or if Shipper seeks to obtain credits or benefits inconsistent therewith, unless Transporter otherwise agrees, it will have the right to immediately terminate or modify any provisions herein or of Attachment A that would allow Shipper to pay amounts less than the maximum applicable Tariff rate.
	(ii)	Limitation on Agreed Upon Rate:  Unless Transporter agrees otherwise, if at any time receipts and/or deliveries are initially sourced into the system, nominated, scheduled and/or made, by any means or by operation of any Tariff mechanisms, with respect to the capacity obtained by, through or under the Agreement at points, or under conditions, other than those specified herein or on Attachment A, then as of such date, and for the remainder of the Service Month in which such non-compliance occurred, or the remainder of the term of the Agreement, whichever is shorter, Shipper shall be obligated to pay no less than the maximum applicable Tariff rates for service under the Agreement.  This limitation shall not apply to the extent that Transporter has requested Shipper to receive and/or deliver other than as specified herein or on Attachment A.  Such request may be made via e-mail, in writing, or via Internet Web Site posting and the document in which such request is made shall be deemed to amend this Agreement to the extent applicable.
	(iii)	Regulatory Authority:  This Agreement (including Attachment A) is subject to Section 16 of the GT&C of Transporter’s Tariff.  Transporter and Shipper hereby acknowledge that this Agreement is subject to all valid and applicable federal and local laws and to the orders, rules and regulations of any duly constituted federal or local regulatory body or governmental authority having jurisdiction.   Any provision of this Agreement which is determined by any court or regulatory body having jurisdiction to be invalid or unenforceable will be ineffective to the extent of such determination only, without invalidating, or otherwise affecting the validity of, the remaining provisions.  Unless the parties agree otherwise, if Transporter has made a good faith determination that a federal or local law, or order, rule or regulation of any governmental authority having or asserting jurisdiction (1) requires performance by Transporter that is inconsistent with the terms specified herein or on Attachment A, or (2) conditions or prohibits the granting of selective discounts or other rates specified herein or on Attachment A, then Transporter may provide notice that it intends to renegotiate the rates under the Agreement.  If the parties fail to reach agreement within forty-five (45) days of any renegotiation notice given pursuant to the terms of this paragraph, then:  (1) the rate provisions herein or on Attachment A shall be terminated, and the rate for service herein or under Attachment A shall be Transporter’s applicable maximum Tariff rate, or (2) if Transporter’s applicable maximum Tariff rate is greater than the rate for service herein or on Attachment A, at the Shipper’s option, the Agreement and any applicable  Attachment A shall terminate.  The effective date of this renegotiation or termination shall be the first

Page 3 of 6

AMENDED AND RESTATED

FIRM (RATE SCHEDULE FT)

TRANSPORTATION SERVICE AGREEMENT

TSA NO.  1006667

			day of the month following the end of the 45-day renegotiation period; provided, however, that the effective date will comply with the requirements of the applicable federal or local law, or order, rule or regulation of any governmental authority having or asserting jurisdiction.
		(iv)	Entire Agreement:  Attachment A, if applicable, shall supplement the Agreement with respect to the matters agreed to, and together shall constitute the entire understanding of the parties relating to said matters as of the effective date stated therein.  Unless otherwise specified, all prior agreements, correspondence, understandings and representations are hereby superseded and replaced by Attachment A and the Agreement.  Except as otherwise provided herein, all terms used herein with initial capital letters are so used with the respective meanings ascribed to them in Transporter’s Tariff.
		(v)	Failure to Exercise Rights:  Failure to exercise any right under Attachment A, if applicable, or the Agreement shall not be considered a waiver of such right in the future.  No waiver of any default in the performance of Attachment A or the Agreement shall be construed as a waiver of any other existing or future default, whether of a like or different character.
	(e)	Inability to Collect Negotiated Rates:  If this Agreement covers a Negotiated Rate transaction, and Transporter is unable to collect Negotiated Rates due to a change in Commission policy or rejection of the transaction by the Commission prior to or during the term of such transaction, then, unless the parties agree otherwise, Shipper shall pay the maximum Tariff rate for the services.  In such event, Transporter shall notify Shipper in writing of the requirement to pay maximum Tariff rates and, if the maximum Tariff rates are greater than the Negotiated Rates under such transaction, Shipper shall have no more than thirty (30) days from the date of such notification to give notice in writing of termination of the applicable Agreement, with such termination to be effective no earlier than the end of the Month following the Month in which such termination notice is received.
5)	OTHER PROVISIONS:
	5.1)	Payments shall be received by Transporter within the time prescribed by Section 14 of the GT&C of Transporter’s Tariff.  Amounts past due hereunder shall bear interest as provided in Section 14 of the GT&C of the Tariff.  Shipper shall pay all costs associated with the collection of such past due amounts including, but not limited to, attorney’s fees and court costs.  Shipper hereby represents and warrants that the party executing this Agreement on its behalf is duly authorized and possesses all necessary corporate or other authority required to legally bind Shipper.
	5.2)	Do the parties agree that the provisions of Section 13.4 of the GT&C of Transporter’s Tariff shall apply with respect to third-party transportation?    Yes ____ No __X__
	5.3)	a)	Does this Agreement supersede and cancel a pre-existing Transportation Service Agreement(s) between the parties?    Yes ____ No __X__
		b)	Does this Agreement amend and restate in its entirety a pre-existing Transportation Service Agreement(s) between the parties?    Yes _X__ No ____ If Yes, the Transportation Service Agreement(s) are described as follows:  Effective April 1, 2009, this Agreement amends and restates Transportation Service Agreement #1006667, originally effective November 5, 2008, as subsequently amended, restated and/or superseded prior to or as of the effective date hereof.
	5.4)	Is this Agreement entered into pursuant to and subject to CAPACITY RELEASE, Section 19 of the GT&C of Transporter’s Tariff?    Yes ____ No __X__

Page 4 of 6

AMENDED AND RESTATED

FIRM (RATE SCHEDULE FT)

TRANSPORTATION SERVICE AGREEMENT

TSA NO.  1006667

	5.5)	Does this Agreement include any other terms/provisions permitted by the Tariff?  Yes __X__ No ____ If Yes, those provisions (including a specific reference to the Tariff authority for each such provision) are as follows:
		a)	In accordance with Section 19.8 of the GT&C of the Tariff, the parties hereby agree that Transporter shall retain, and not credit back to Shipper, credits, if any, for capacity releases to the extent that amounts paid by or invoiced to Replacement Shipper(s) as, or attributable to, demand or reservation type charges up to the then applicable Transporter’s maximum tariff rate exceed on a daily basis, or any lesser applicable period, the amount of Shipper’s invoiced demand component.
		b)	In accordance with Section 21.1 of the GT&C of the tariff, the parties hereby agree that Shipper shall have contractual “right of first refusal” which will provide to it the same rights and obligation regarding extending service under the Agreement as to reserved capacity on Transporter’s system beyond the termination or expiration date as would be available to Shippers eligible to invoke the provisions of Section 21 of the GT&C of the Tariff, as on file and in effect from time to time.
6)	All modifications, amendments or supplements to the terms and provisions hereof shall be effected only by supplementary written (or electronic, to the extent Transporter permits or requires) consent of the parties.
7)	SIGNATURE:  This Agreement constitutes a contract with Transporter for the transportation of natural gas, subject to the terms and conditions hereof, the General Terms and Conditions attached hereto, and any applicable attachment(s), all of which are incorporated herein by reference and made part of this Agreement.
CENTERPOINT ENERGY GAS TRANSMISSION				LACLEDE ENERGY RESOURCES, INC.
	COMPANY
By:	/s/ Willie Underwood			By:	/s/ S.E. Jaskowiak
Name:	Willie Underwood			Name:	S.E. Jaskowiak
Title:	Vice President, Marketing			Title:	Vice President and General Manager
Date:	3/31/09			Date:	3/30/09

Page 5 of 6

GENERAL TERMS AND CONDITIONS

TO AMENDED AND RESTATED

FIRM (RATE SCHEDULE FT)

TRANSPORTATION SERVICE AGREEMENT

TSA NO.  1006667

1. This Agreement shall be subject to the provisions of Rate Schedule FT as well as the General Terms and Conditions (“GT&C”) set forth in Transporter’s Tariff, as on file and in effect from time to time, all of which by this reference are made a part hereof.

2. In accordance with Section 12.2 of the GT&C of Transporter’s Tariff, Transporter shall have the right at any time, and from time to time, to file and place into effect unilateral changes or modifications in the rates and charges, and other terms and conditions of service hereunder, and as set forth in said Rate Schedule and in said GT&C of Transporter’s Tariff, in accordance with the Natural Gas Act or other applicable law.  Nothing contained in the foregoing provision shall preclude or prevent Shipper from protesting any such changes or modifications; however, Shipper agrees to pay all rates and charges, and to comply with all terms and conditions, in effect under the Tariff.

3. Upon Shipper’s failure to pay when due all or any part of amounts billed in connection with services rendered or to comply with the terms of this Agreement, Transporter may terminate this Agreement and/or suspend service, as appropriate, in accordance with the provisions of Section 14 of the GT&C of Transporter’s Tariff.

4. In accordance with Section 21.1 of the GT&C of Transporter’s Tariff, upon termination hereof for whatever reason, Shipper agrees to stop delivering gas to Transporter for service and, unless otherwise agreed by Transporter, to seek no further service from Transporter hereunder.  Shipper agrees to cooperate with and assist Transporter in obtaining such regulatory approvals and authorizations, if any, as are necessary or appropriate in view of such termination and abandonment of service hereunder.

5. In accordance with Section 5.7(e) of the GT&C of Transporter’s Tariff, termination of this Agreement shall not relieve either party of any obligation that might otherwise exist to cash-out or correct any Imbalance hereunder nor relieve Shipper of its obligation to pay any monies due hereunder to Transporter and any portions of this Agreement necessary to accomplish such purposes shall be deemed to survive for the time and to the extent required.

6. In accordance with Sections 2.1 and 2.2 of Rate Schedule FT of Transporter’s Tariff, subject to the provisions of the Tariff and this Agreement, Transporter shall receive, transport, and deliver, for the account of Shipper for the purposes contemplated herein, on a firm basis a quantity of Gas up to the quantity or quantities specified in  the Agreement.

7. In accordance with Sections 2.1 and 3.3 of Rate Schedule FT of Transporter’s Tariff, Gas shall be (i) tendered to Transporter for transportation hereunder at the Point(s) of Receipt and (ii) delivered by Transporter after transportation to Shipper, or for Shipper’s account, at the Point(s) of Delivery on the terms and at the points shown in this Agreement.  Subject to the provisions of the Tariff, Transporter shall tender for delivery quantities of Gas thermally-equivalent to those delivered by Shipper, less, as applicable, Delhi Fuel Use, Wheeling LUFG, Line CP Fuel Use and LUFG, Fuel Use and LUFG, or Storage Fuel Use and LUFG, retained.

8. Except as otherwise permitted in the Tariff, and in accordance with Section 19 of the GT&C of Transporter’s Tariff, this Agreement shall not be assigned by Shipper in whole or in part, nor shall Shipper agree to provide services to others by use of any capacity contracted for under the Agreement, without Transporter’s prior written consent.  In addition to all other rights and remedies, Transporter may terminate the Agreement immediately if it is assigned by Shipper or if Shipper subcontracts the capacity to others contrary to the provisions hereof, whether the assignment or contract be voluntary, or by operation of law or otherwise.  Subject to the above, the respective rights and obligations of the parties under the Agreement shall extend to and be binding upon their heirs, successors, assigns and legal representatives.  Subject to Section 14 of the GT&C of Transporter’s Tariff, Shipper may assign this Agreement to an entity with which it is affiliated.  Any person which shall succeed by purchase, merger or consolidation to the properties, substantially as an entirety, of either party hereto, shall be entitled to the rights and shall be subject to the obligations of its predecessor in title under this Agreement; and either party may assign or pledge this Agreement under the provisions of any mortgage, deed of trust, indenture, bank credit agreement, assignment or similar instrument which it has executed or may execute hereafter.

9. Any notice, statement, or bill provided for in this Agreement shall be in writing (or provided electronically via the Internet to the extent Transporter permits or requires) and shall be considered as having been given if hand delivered, or, if received, when mailed by United States mail, postage prepaid, to the addresses specified herein, or such other addresses as either party shall designate by written notice to the other.  Additionally, notices shall be considered as having been given, if received, when sent via facsimile or through electronic data interchange.

10. In accordance with the form of credit application contained in the Tariff, Shipper agrees that any representations and agreements contained in any credit application submitted in connection with this service shall be incorporated herein by reference and made a part hereof.

Page 6 of 6

EX-12

Exhibit 12

THE LACLEDE GROUP, INC. AND SUBSIDIARY COMPANIES
SCHEDULE OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
		Twelve Months Ended
		Mar. 31,		September 30,
	(Thousands of Dollars)		2009		2008		2007		2006		2005		2004
	Income from continuing      operations before interest
	charges and income taxes	$	130,358	$	113,228	$	101,867	$	100,080	$	78,676	$	78,604
	Add: One third of applicable
	rentals charged to operating
	expense (which approximates
	the interest factor)		1,726		1,691		1,485		1,291		938		538
	Total Earnings	$	132,084	$	114,919	$	103,352	$	101,371	$	79,614	$	79,142
	Interest on long-term debt –
	Laclede Gas	$	22,141	$	19,851	$	22,502	$	22,329	$	22,835	$	22,010
	Other interest		7,082		9,626		11,432		10,555		4,418		3,511
	Add: One third of applicable
	rentals charged to operating
	expense (which approximates
	the interest factor)		1,726		1,691		1,485		1,291		938		538
	Total Fixed Charges	$	30,949	$	31,168	$	35,419	$	34,175	$	28,191	$	26,059
	Ratio of Earnings to Fixed
	Charges		4.27		3.69		2.92		2.97		2.82		3.04

LACLEDE GAS COMPANY
SCHEDULE OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
		Twelve Months Ended
		Mar. 31,		September 30,
	(Thousands of Dollars)		2009		2008		2007		2006		2005		2004
	Income before interest
	charges and income taxes	$	80,901	$	84,684	$	80,134	$	72,077	$	72,092	$	73,956
	Add: One third of applicable
	rentals charged to operating
	expense (which approximates
	the interest factor)		1,726		1,691		1,485		1,291		938		538
	Total Earnings	$	82,627	$	86,375	$	81,619	$	73,368	$	73,030	$	74,494
	Interest on long-term debt	$	22,141	$	19,851	$	22,502	$	22,329	$	22,835	$	22,010
	Other interest		8,048		10,363		11,101		10,236		4,076		3,192
	Add: One third of applicable
	rentals charged to operating
	expense (which approximates
	the interest factor)		1,726		1,691		1,485		1,291		938		538
	Total Fixed Charges	$	31,915	$	31,905	$	35,088	$	33,856	$	27,849	$	25,740
	Ratio of Earnings to Fixed
	Charges		2.59		2.71		2.33		2.17		2.62		2.89

EX-31

Exhibit 31

CERTIFICATION

I, Douglas H. Yaeger, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of The Laclede Group, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	April 29, 2009	Signature:	/s/ Douglas H. Yaeger
			Douglas H. Yaeger
			Chairman of the Board,
			President and Chief
			Executive Officer

CERTIFICATION

I, Mark D. Waltermire, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of The Laclede Group, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	April 29, 2009	Signature:	/s/ Mark D. Waltermire
			Mark D. Waltermire
			Chief Financial Officer

CERTIFICATION

I, Douglas H. Yaeger, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Laclede Gas Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	April 29, 2009	Signature:	/s/ Douglas H. Yaeger
			Douglas H. Yaeger
			Chairman of the Board,
			President and Chief
			Executive Officer

CERTIFICATION

I, Mark D. Waltermire, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Laclede Gas Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	April 29, 2009	Signature:	/s/ Mark D. Waltermire
			Mark D. Waltermire
			Senior Vice President and
			Chief Financial Officer

EX-32

Exhibit 32

Section 1350 Certification

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, I, Douglas H. Yaeger, Chairman of the Board, President and Chief Executive Officer of The Laclede Group, Inc., hereby certify that

(a)	To the best of my knowledge, the accompanying report on Form 10-Q for the quarter ended March 31, 2009 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(b)	To the best of my knowledge, the information contained in the accompanying report on Form 10-Q for the quarter ended March 31, 2009 fairly presents, in all material respects, the financial condition and results of operations of The Laclede Group, Inc.

Date:	April 29, 2009	/s/ Douglas H. Yaeger
		Douglas H. Yaeger
		Chairman of the Board, President
		and Chief Executive Officer

Section 1350 Certification

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, I, Mark D. Waltermire, Chief Financial Officer of The Laclede Group, Inc., hereby certify that

(a)	To the best of my knowledge, the accompanying report on Form 10-Q for the quarter ended March 31, 2009 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(b)	To the best of my knowledge, the information contained in the accompanying report on Form 10-Q for the quarter ended March 31, 2009 fairly presents, in all material respects, the financial condition and results of operations of The Laclede Group, Inc.

Date:	April 29, 2009	/s/ Mark D. Waltermire
		Mark D. Waltermire
		Chief Financial Officer

Section 1350 Certification

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, I, Douglas H. Yaeger, Chairman of the Board, President and Chief Executive Officer of Laclede Gas Company, hereby certify that

(a)	To the best of my knowledge, the accompanying report on Form 10-Q for the quarter ended March 31, 2009 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(b)	To the best of my knowledge, the information contained in the accompanying report on Form 10-Q for the quarter ended March 31, 2009 fairly presents, in all material respects, the financial condition and results of operations of Laclede Gas Company.

Date:	April 29, 2009	/s/ Douglas H. Yaeger
		Douglas H. Yaeger
		Chairman of the Board, President
		and Chief Executive Officer

Section 1350 Certification

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, I, Mark D. Waltermire, Senior Vice President and Chief Financial Officer of Laclede Gas Company, hereby certify that

(a)	To the best of my knowledge, the accompanying report on Form 10-Q for the quarter ended March 31, 2009 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(b)	To the best of my knowledge, the information contained in the accompanying report on Form 10-Q for the quarter ended March 31, 2009 fairly presents, in all material respects, the financial condition and results of operations of Laclede Gas Company.

Date:	April 29, 2009	/s/ Mark D. Waltermire
		Mark D. Waltermire
		Senior Vice President and
		Chief Financial Officer

EX-99.1

Exhibit 99.1

LACLEDE GAS COMPANY

STATEMENTS OF INCOME

 (UNAUDITED)

	Three Months Ended					Six Months Ended
	March 31,					March 31,
(Thousands)		2009		2008			2009		2008
Operating Revenues:
Utility	$	440,468	$	507,089		$	798,569	$	827,981
Other		599		740			1,196		1,526
Total Operating Revenues		441,067		507,829			799,765		829,507
Operating Expenses:
Utility
Natural and propane gas		313,506		377,526			568,403		600,367
Other operation expenses		40,251		38,989			76,552		74,202
Maintenance		7,261		5,814			13,795		12,049
Depreciation and amortization		9,180		8,763			18,299		17,476
Taxes, other than income taxes		28,216		29,255			46,574		45,936
Total Utility Operating Expenses		398,414		460,347			723,623		750,030
Other		585		805			1,115		1,530
Total Operating Expenses		398,999		461,152			724,738		751,560
Operating Income		42,068		46,677			75,027		77,947
Other Income and (Income Deductions) – Net		36		(523	)		646		1,509
Interest Charges:
Interest on long-term debt		6,145		4,875			12,291		10,001
Other interest charges		1,232		2,720			4,421		6,736
Total Interest Charges		7,377		7,595			16,712		16,737
Income Before Income Taxes		34,727		38,559			58,961		62,719
Income Tax Expense		12,541		13,259			20,578		21,624
Net Income		22,186		25,300			38,383		41,095
Dividends on Redeemable Preferred Stock		7		9			15		19
Earnings Applicable to Common Stock	$	22,179	$	25,291		$	38,368	$	41,076
See Notes to Financial Statements.

1

LACLEDE GAS COMPANY

STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

	Three Months Ended				Six Months Ended
	March 31,				March 31,
(Thousands)		2009		2008		2009		2008
Net Income	$	22,186	$	25,300	$	38,383	$	41,095
Other Comprehensive Income, Before Tax:
Net hedging gain arising during period		106		—		106		—
Amortization of actuarial loss included in net periodic
pension cost		50		43		100		86
Other Comprehensive Income, Before Tax		156		43		206		86
Income Tax Expense Related to Items of Other
Comprehensive Income		63		16		80		33
Other Comprehensive Income, Net of Tax		93		27		126		53
Comprehensive Income	$	22,279	$	25,327	$	38,509	$	41,148
See Notes to Financial Statements.

2

LACLEDE GAS COMPANY

BALANCE SHEETS

(UNAUDITED)

	March 31,			Sept. 30,			March 31,
(Thousands)	2009			2008			2008
ASSETS
Utility Plant	$	1,247,921		$	1,229,174		$	1,204,984
Less:  Accumulated depreciation and amortization		414,956			405,977			398,661
Net Utility Plant		832,965			823,197			806,323
Other Property and Investments		37,822			37,570			37,585
Current Assets:
Cash and cash equivalents		2,879			3,163			4,850
Accounts receivable:
Utility		166,854			98,708			218,674
Non-utility		1,694			1,601			1,571
Associated companies		371			3,028			204
Other		4,689			4,852			5,068
Allowances for doubtful accounts		(12,297	)		(12,476	)		(13,478	)
Delayed customer billings		35,213			—			40,417
Inventories:
Natural gas stored underground at LIFO cost		69,940			206,194			31,730
Propane gas at FIFO cost		19,861			19,911			19,904
Materials, supplies, and merchandise at average cost		5,375			5,176			5,283
Derivative instrument assets		28,903			54,578			13,773
Unamortized purchased gas adjustments		8,891			33,411			4,365
Deferred income taxes		1,747			—			4,114
Prepayments and other		5,295			6,635			5,469
Total Current Assets		339,415			424,781			341,944
Deferred Charges:
Regulatory assets		395,869			334,755			265,495
Other		5,572			5,512			4,836
Total Deferred Charges		401,441			340,267			270,331
Total Assets	$	1,611,643		$	1,625,815		$	1,456,183

3

LACLEDE GAS COMPANY

BALANCE SHEETS (Continued)

(UNAUDITED)

	March 31,			Sept. 30,			March 31,
(Thousands, except share amounts)	2009			2008			2008
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock and Paid-in capital (11,614, 10,416, and     10,365 shares issued, respectively)	$	201,441		$	157,883		$	154,560
Retained earnings		223,860			202,535			220,917
Accumulated other comprehensive loss		(1,664	)		(1,790	)		(1,674	)
Total Common Stock Equity		423,637			358,628			373,803
Redeemable preferred stock (less current sinking fund     requirements)		—			467			467
Long-term debt		389,211			389,181			309,152
Total Capitalization		812,848			748,276			683,422
Current Liabilities:
Notes payable		238,800			215,900			171,650
Notes payable – associated companies		—			89,216			—
Accounts payable		37,172			58,483			92,422
Accounts payable – associated companies		4,348			—			4,563
Advance customer billings		—			25,548			—
Current portion of preferred stock		—			160			160
Wages and compensation accrued		12,304			12,197			11,880
Dividends payable		8,677			8,407			8,306
Customer deposits		13,045			14,020			13,960
Interest accrued		10,333			10,094			9,888
Taxes accrued		32,957			10,434			33,345
Deferred income taxes current		—			7,781			—
Other		8,983			8,720			6,804
Total Current Liabilities		366,619			460,960			352,978
Deferred Credits and Other Liabilities:
Deferred income taxes		232,099			222,379			234,122
Unamortized investment tax credits		3,863			3,973			4,086
Pension and postretirement benefit costs		103,226			98,513			67,515
Asset retirement obligations		27,622			26,817			26,835
Regulatory liabilities		42,506			42,191			64,027
Other		22,860			22,706			23,198
Total Deferred Credits and Other Liabilities		432,176			416,579			419,783
Total Capitalization and Liabilities	$	1,611,643		$	1,625,815		$	1,456,183
See Notes to Financial Statements.

4

LACLEDE GAS COMPANY

STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended
	March 31,
(Thousands)	2009			2008
Operating Activities:
Net Income	$	38,383		$	41,095
Adjustments to reconcile net income to net cash     provided by (used in) operating activities:
Depreciation and amortization		18,299			17,476
Deferred income taxes and investment tax credits		(4,999	)		(2,971	)
Other – net		3,091			1,097
Changes in assets and liabilities:
Accounts receivable – net		(65,598	)		(111,550	)
Unamortized purchased gas adjustments		24,520			8,448
Deferred purchased gas costs		(54,990	)		53,094
Accounts payable		(15,081	)		47,836
Delayed customer billings – net		(60,761	)		(65,857	)
Taxes accrued		22,491			14,135
Natural gas stored underground		136,254			106,468
Other assets and liabilities		26,575			13,300
Net cash provided by operating activities		68,184			122,571
Investing Activities:
Capital expenditures		(25,653	)		(26,407	)
Other investments		(1,279	)		237
Net cash used in investing activities		(26,932	)		(26,170	)
Financing Activities:
Maturity of First Mortgage Bonds		—			(40,000	)
Repayment of short-term debt - net		(66,316	)		(39,750	)
Changes in book overdrafts		419			—
Dividends paid		(16,782	)		(16,079	)
Issuance of common stock to Laclede Group		41,256			1,967
Excess tax benefits from stock-based compensation		630			17
Preferred stock reacquired		(627	)		(160	)
Other		(116	)		—
Net cash used in financing activities		(41,536	)		(94,005	)
Net (Decrease) Increase in Cash and Cash Equivalents		(284	)		2,396
Cash and Cash Equivalents at Beginning of Period		3,163			2,454
Cash and Cash Equivalents at End of Period	$	2,879		$	4,850
Supplemental Disclosure of Cash Paid (Refunded) During the Period for:
Interest	$	16,375		$	17,880
Income taxes		(5,513	)		6,925
See Notes to Financial Statements.

5

LACLEDE GAS COMPANY

NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These notes are an integral part of the accompanying financial statements of Laclede Gas Company (Laclede Gas or the Utility). In the opinion of Laclede Gas, this interim report includes all adjustments (consisting of only normal recurring accruals) necessary for the fair presentation of the results of operations for the periods presented. This Form 10-Q should be read in conjunction with the Notes to Financial Statements contained in Exhibit 99.1 of the Laclede Group’s Fiscal Year 2008 Form 10-K.

Laclede Gas is a regulated natural gas distribution utility having a material seasonal cycle. As a result, these interim statements of income for Laclede Gas are not necessarily indicative of annual results or representative of succeeding quarters of the fiscal year. Due to the seasonal nature of the business of Laclede Gas, earnings are typically concentrated in the November through April period, which generally corresponds with the heating season.

BASIS OF PRESENTATION - In compliance with generally accepted accounting principles, transactions between Laclede Gas and its affiliates as well as intercompany balances on Laclede Gas’ Balance Sheet have not been eliminated from the Laclede Gas financial statements.

Laclede Gas provides administrative and general support to affiliates. All such costs, which are not material, are billed to the appropriate affiliates. Also, Laclede Group may charge or reimburse Laclede Gas for certain tax-related amounts. Unpaid balances relating to these activities are reflected in the Laclede Gas Balance Sheets as Accounts receivable-Associated companies or as Accounts payable-associated companies. Additionally, Laclede Gas may, on occasion, borrow funds from or lend funds to affiliated companies. Unpaid balances relating to these arrangements, if any, are reflected in Notes receivable-associated companies or Notes payable-associated companies.

REVENUE RECOGNITION - Laclede Gas reads meters and bills its customers on monthly cycles. The Utility records its utility operating revenues from gas sales and transportation services on an accrual basis that includes estimated amounts for gas delivered, but not yet billed. The accruals for unbilled revenues are reversed in the subsequent accounting period when meters are actually read and customers are billed. The amounts of accrued unbilled revenues at March 31, 2009 and 2008, for the Utility, were $26.2 million and $31.9 million, respectively. The amount of accrued unbilled revenue at September 30, 2008 was $13.5 million.

CASH AND CASH EQUIVALENTS - All highly liquid debt instruments purchased with original maturities of three months or less are considered to be cash equivalents. Such instruments are carried at cost, which approximates market value. Outstanding checks on the Utility’s controlled disbursement bank accounts in excess of funds on deposit create book overdrafts (which are funded at the time checks are presented for payment) and are classified as Other Current Liabilities on the Balance Sheets. Changes in book overdrafts between periods are reflected as Financing Activities in the Statements of Cash Flows.

GROSS RECEIPTS TAXES - Gross receipts taxes associated with Laclede Gas’ natural gas utility service are imposed on the Utility and billed to its customers. These amounts are recorded gross in the Statements of Income. Amounts recorded in Utility Operating Revenues for the quarters ended March 31, 2009 and 2008 were $23.8 million, and $25.2 million, respectively. Amounts recorded in Utility Operating Revenues for the six months ended March 31, 2009 and 2008 were $38.6 million and $38.2 million, respectively. Gross receipts taxes are expensed by the Utility and included in the Taxes, Other Than Income Taxes line.

STOCK-BASED COMPENSATION – Officers and employees of Laclede Gas, as determined by the Compensation Committee of Laclede Group’s Board of Directors, are eligible to be selected for awards under the Laclede Group 2006 Equity Incentive Plan. For Laclede Group’s non-employee directors, shares are awarded under the Restricted Stock Plan for Non-Employee Directors. Refer to Note 1 of the Financial Statements included in Exhibit 99.1 of the Laclede Group’s Form 10-K for the fiscal year ended September 30, 2008 for descriptions of these plans. In January 2009, shareholders of Laclede Group approved an amendment to the Restricted Stock Plan for Non-Employee Directors (Plan), increasing the number of shares of common stock available under the Plan to 150,000 from 50,000. For awards made to its employees, the Utility records its allocation of compensation cost from Laclede Group with a corresponding increase to additional paid-in capital.

6

The amounts of compensation cost recognized for share-based compensation arrangements are presented below:

	Three Months Ended						Six Months Ended
	March 31,						March 31,
(Thousands)	2009			2008			2009			2008
Total compensation cost	$	1,093		$	628		$	1,832		$	1,168
Compensation cost capitalized		(253	)		(162	)		(433	)		(297	)
Compensation cost recognized in net income		840			466			1,399			871
Income tax benefit recognized in net income		(324	)		(181	)		(539	)		(337	)
Compensation cost recognized in net income,
net of income tax	$	516		$	285		$	860		$	534

As of March 31, 2009, there was $6.2 million in unrecognized compensation cost related to nonvested share-based compensation arrangements that is expected to be allocated to the Utility over a weighted average period of 2.5 years.

NEW ACCOUNTING STANDARDS – In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements.” This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The Statement applies to fair value measurements required under other accounting guidance that require or permit fair value measurements. Accordingly, this Statement does not require any new fair value measurements. The guidance in this Statement does not apply to Laclede Group’s stock-based compensation plans accounted for in accordance with SFAS No. 123(R), “Share-Based Payment.” The Utility partially adopted SFAS No. 157 on October 1, 2008 and elected the one-year deferral allowed by FASB Staff Position (FSP) No. FAS 157-2, which permits delayed application of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except for those recognized or disclosed at fair value on a recurring basis. The partial adoption of SFAS No. 157 had no impact on the Utility’s financial position or results of operations. For disclosures required pursuant to SFAS No. 157, see Note 3, Fair Value Measurements. The Utility will adopt SFAS No. 157 for certain nonfinancial assets and nonfinancial liabilities (primarily asset retirement obligations) as of the beginning of fiscal year 2010 and does not anticipate that such adoption will have a material impact on the Utility’s financial position or results of operations.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.” Laclede Gas adopted the recognition and disclosure provisions of this Statement effective September 30, 2007. The Statement also requires that plan assets and benefit obligations be measured as of the date of the employer’s fiscal year-end statement of financial position. In conjunction with adoption of this provision of SFAS No. 158, the Utility will be required to change its valuation date for its pension and other postretirement plans from June 30 to September 30. The Utility will adopt this provision on September 30, 2009. Adoption will require certain adjustments to retained earnings and other comprehensive income, the total amounts of which will not be known until the September 30, 2009 actuarial valuation of the plans is complete. However, the majority of these adjustments, attributable to the Utility’s qualified pension plans and other postretirement benefit plans, are expected to be deferred with entries to Regulatory assets.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” The Statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. This Statement does not affect any existing accounting literature that requires certain assets and liabilities to be carried at fair value. Upon adoption of SFAS No. 159, entities are permitted to choose, at specified election dates, to measure eligible items at fair value (fair value option). Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each reporting date. The decision about whether to elect the fair value option is applied instrument by instrument with few exceptions. The decision is also irrevocable (unless a new election date occurs) and must be applied to entire instruments and not to portions of instruments. SFAS No. 159 requires that cash flows related to items measured at fair value be classified in the statement of cash flows according to their nature and purpose as required by SFAS No. 95, “Statement of Cash Flows” (as amended). The Utility adopted SFAS No. 159 on October 1, 2008. The Utility did not elect the fair value option for any instruments not currently reported at fair value. Therefore, the adoption of this Statement had no effect on the Utility’s financial position or results of operations.

7

In June 2007, the FASB ratified the consensus reached in Emerging Issues Task Force (EITF) Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards.” This Issue addresses how an entity should recognize the tax benefit received on dividends that are (a) paid to employees holding equity-classified nonvested shares, equity-classified nonvested share units, or equity-classified outstanding share options and (b) charged to retained earnings under SFAS No. 123(R). The Task Force reached a consensus that such tax benefits should be recognized as an increase in additional paid-in capital. This EITF Issue also addresses how the accounting for these tax benefits is affected if an entity’s estimate of forfeitures changes in subsequent periods. With the adoption of this EITF issue on October 1, 2008, the Utility now records these income tax benefits as increases to additional paid-in capital. Previously, the Utility recorded these income tax benefits as reductions to income tax expense. Adoption of this EITF issue did not have a material effect on the Utility’s financial position or results of operations.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities.” This Statement amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” by requiring enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This Statement is effective for the Utility’s interim and annual financial statements beginning with the second quarter of fiscal year 2009. The adoption of this standard had no effect on the Utility’s financial position or results of operations. For disclosures required pursuant to SFAS No. 161, see Note 4, Derivative Instruments and Hedging Activities.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.” SFAS No. 162 identifies the sources of accounting principles and the framework for selecting principles to be used in the preparation and presentation of financial statements in accordance with generally accepted accounting principles. The Utility adopted this Statement effective November 15, 2008. The adoption of SFAS No. 162 did not have any effect on the Utility’s financial statements.

In December 2008, the FASB issued FSP No. FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets.” This FSP provides guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. The FSP requires disclosure of information regarding investment policies and strategies, the categories of plan assets, fair value measurements of plan assets, and significant concentrations of risk. The Utility will be required to provide the additional disclosures with its annual financial statements for fiscal year 2010. The Utility is currently evaluating the provisions of this FSP.

In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments.” This FSP requires entities to provide disclosure of the fair value of all financial instruments for which it is practicable to estimate that value, whether recognized or not recognized in the balance sheet, in interim reporting periods. Prior to the issuance of this FSP, such disclosures were required only in annual reporting periods. The FSP does not require disclosures for earlier periods presented for comparative purposes at initial adoption. The Utility will provide the required disclosures beginning with the third quarter of fiscal year 2009, as required by the FSP.

2. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

Pension Plans

Laclede Gas has non-contributory defined benefit, trusteed forms of pension plans covering substantially all employees. Effective January 1, 2009, the Utility modified the calculation of future benefits under the primary plan from a years of service and final average compensation formula to a cash balance formula which accrues benefits based on a percentage of compensation. Benefits attributable to plan participation prior to January 1, 2009 will be based on final average compensation at the date of termination of employment and years of service earned through January 1, 2009. Plan assets consist primarily of corporate and U.S. government obligations and pooled equity funds.

Pension costs for both the quarters ending March 31, 2009 and 2008 were $1.5 million, including amounts charged to construction. Pension costs for both the six months ended March 31, 2009 and 2008 were $3.1 million, including amounts charged to construction.

8

The net periodic pension costs include the following components:

	Three Months Ended						Six Months Ended
	March 31,						March 31,
(Thousands)	2009			2008			2009			2008
Service cost – benefits earned
during the period	$	1,817		$	3,243		$	5,302		$	6,485
Interest cost on projected
benefit obligation		5,229			4,670			10,497			9,340
Expected return on plan assets		(5,234	)		(5,163	)		(10,469	)		(10,325	)
Amortization of prior service cost		259			272			518			544
Amortization of actuarial loss		774			791			1,548			1,582
Sub-total		2,845			3,813			7,396			7,626
Regulatory adjustment		(1,296	)		(2,280	)		(4,298	)		(4,560	)
Net pension cost	$	1,549		$	1,533		$	3,098		$	3,066

Pursuant to the provisions of the Laclede Gas pension plans, pension obligations may be satisfied by lump-sum cash payments. Pursuant to a Missouri Public Service Commission (MoPSC or Commission) Order, lump-sum payments are recognized as settlements (which can result in gains or losses) only if the total of such payments exceeds 100% of the sum of service and interest costs. No lump-sum payments were recognized as settlements during the six months ended March 31, 2009 and March 31, 2008.

Pursuant to a MoPSC Order, the return on plan assets is based on the market-related value of plan assets implemented prospectively over a four-year period. Gains or losses not yet includible in pension cost are amortized only to the extent that such gain or loss exceeds 10% of the greater of the projected benefit obligation or the market-related value of plan assets. Such excess is amortized over the average remaining service life of active participants. The recovery in rates for the Utility’s qualified pension plans is based on an allowance of $4.8 million annually effective August 1, 2007. The difference between this amount and pension expense as calculated pursuant to the above and that otherwise would be included in the Statements of Income and Comprehensive Income is deferred as a regulatory asset or regulatory liability.

Postretirement Benefits

Laclede Gas provides certain life insurance benefits at retirement. Medical insurance is available after early retirement until age 65. The transition obligation not yet includible in postretirement benefit cost is being amortized over 20 years. Postretirement benefit costs for both the quarters ended March 31, 2009 and 2008 were $1.9 million, including amounts charged to construction. Postretirement benefit costs for both the six months ended March 31, 2009 and 2008 were $3.8 million, including amounts charged to construction.

Net periodic postretirement benefit costs consisted of the following components:

	Three Months Ended						Six Months Ended
	March 31,						March 31,
(Thousands)	2009			2008			2009			2008
Service cost – benefits earned
during the period	$	1,283		$	1,140		$	2,566		$	2,280
Interest cost on accumulated
postretirement benefit obligation		1,170			977			2,340			1,954
Expected return on plan assets		(594	)		(509	)		(1,188	)		(1,019	)
Amortization of transition obligation		34			34			68			68
Amortization of prior service cost		(582	)		(582	)		(1,164	)		(1,164	)
Amortization of actuarial loss		877			746			1,754			1,492
Sub-total		2,188			1,806			4,376			3,611
Regulatory adjustment		(277	)		105			(555	)		210
Net postretirement benefit cost	$	1,911		$	1,911		$	3,821		$	3,821

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Missouri state law provides for the recovery in rates of SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” accrued costs provided that such costs are funded through an independent, external funding mechanism. Laclede Gas established Voluntary Employees’ Beneficiary Association (VEBA) and Rabbi trusts as its external funding mechanisms. VEBA and Rabbi trusts’ assets consist primarily of money market securities and mutual funds invested in stocks and bonds.

Pursuant to a MoPSC Order, the return on plan assets is based on the market-related value of plan assets implemented prospectively over a four-year period. Gains and losses not yet includible in postretirement benefit cost are amortized only to the extent that such gain or loss exceeds 10% of the greater of the accumulated postretirement benefit obligation or the market-related value of plan assets. Such excess is amortized over the average remaining service life of active participants. Previously, the recovery in rates for the postretirement benefit costs was based on an alternative methodology for amortization of unrecognized gains and losses as ordered by the MoPSC. The Commission ordered that the recovery in rates be based on an annual allowance of $7.6 million, effective August 1, 2007. The difference between this amount and postretirement benefit cost based on the above and that otherwise would be included in the Statements of Income and Comprehensive Income is deferred as a regulatory asset or regulatory liability.

3. FAIR VALUE MEASUREMENTS

As discussed in the New Accounting Standards section of Note 1, effective October 1, 2008, the Utility partially adopted the provisions of SFAS No. 157. This Statement establishes a three-level hierarchy for fair value measurements that prioritizes the inputs used to measure fair value. Assessment of the significance of a particular input to the fair value measurements may require judgment and may affect the valuation of the asset or liability and its placement within the fair value hierarchy.

The following table categorizes the assets and liabilities in the Balance Sheets that are accounted for at fair value on a recurring basis in periods subsequent to initial recognition.

As of March 31, 2009
(Thousands)		Quoted Prices in Active Markets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Effects of Netting and Cash Margin Receivables /Payables			Total
Assets
Marketable securities	$	8,325	$	—	$	—	$	—		$	8,325
Derivative instruments		5,243		—		—		23,660			28,903
Total	$	13,568	$	—	$	—	$	23,660		$	37,228
Liabilities
Derivative instruments	$	112,215	$	—	$	—	$	(112,215	)	$	—

Marketable securities included in Level 1 are mutual funds valued based on quoted market prices of identical securities that are provided by the trustees of these securities. Derivative instruments included in Level 1 are valued using quoted market prices on the New York Mercantile Exchange (NYMEX). Marketable securities are included in the Other investments line of the Balance Sheets. Liabilities for derivative instruments, if any, are included in the Other line of the Current Liabilities section of the Balance Sheets. Derivative assets and liabilities, including receivables and payables associated with cash margin requirements, are presented net in the Balance Sheets when a legally enforceable netting agreement exists between Laclede Gas and the counterparty to a derivative contract.

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4. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Laclede Gas has a risk management policy that allows for the purchase of natural gas derivative instruments with the goal of managing price risk associated with purchasing natural gas on behalf of its customers. This policy prohibits speculation. The policy permits the Utility to hedge up to 70% of its normal volumes purchased for up to a 36-month period. Costs and cost reductions, including carrying costs, associated with the Utility’s use of natural gas derivative instruments are allowed to be passed on to the Utility’s customers through the operation of its Purchased Gas Adjustment (PGA) Clause, through which the MoPSC allows the Utility to recover gas supply costs, subject to prudence review. Accordingly, Laclede Gas does not expect any adverse earnings impact as a result of the use of these derivative instruments. The Utility does not designate these instruments as hedging instruments under SFAS No. 133 because gains or losses associated with the use of these derivative instruments are deferred and recorded as regulatory assets or regulatory liabilities pursuant to SFAS No. 71, “Accounting for the Effects of Certain Types of Regulation,” and, as a result, have no direct impact on the Statements of Income. The timing of the operation of the PGA clause may cause interim variations in short-term cash flows because the Utility is subject to cash margin requirements associated with changes in the values of these instruments. Nevertheless, carrying costs associated with such requirements are recovered through the PGA Clause.

From time to time, Laclede Gas purchases NYMEX futures contracts to help stabilize operating costs associated with forecasted purchases of gasoline and diesel fuels used to power vehicles and equipment used in the course of its business. At March 31, 2009, Laclede Gas held 0.8 million gallons of gasoline futures contracts at an average price of $1.32 per gallon and 0.1 million gallons of heating oil futures contracts (to hedge diesel fuel purchases) at an average price of $1.26 per gallon. Most of these futures contracts, the longest of which extends to 2010, are designated as cash flow hedges of forecasted transactions pursuant to SFAS No. 133. The gains or losses on these derivative instruments are not subject to the Utility’s PGA Clause.

Derivative instruments designated as cash flow hedges of forecasted transactions are recognized on the Balance Sheets at fair value and the change in the fair value of the effective portion of these hedge instruments is recorded, net of tax, in Other Comprehensive Income (OCI). Accumulated Other Comprehensive Income (AOCI) is a component of Total Common Stock Equity. Amounts are reclassified from AOCI into earnings when the hedged items affect net income, using the same revenue or expense category that the hedged item impacts. Based on market prices at March 31, 2009, it is expected that approximately $0.1 million of pre-tax unrealized gains will be reclassified into the Statement of Income during the next twelve months. Cash flows from hedging transactions are classified in the same category as the cash flows from the items that are being hedged in the Statements of Cash Flows.

The Utility’s derivative instruments consist primarily of NYMEX positions. The NYMEX is the primary national commodities exchange on which natural gas derivatives are traded. NYMEX-traded contracts are supported by the financial and credit quality of the clearing members of the NYMEX and have nominal credit risk. Open NYMEX natural gas futures positions at March 31, 2009 were as follows:

	MMBtu (millions)	Avg. Price Per MMBtu
Open long futures positions
Fiscal 2009	8.53	$	8.59
Fiscal 2010	14.55		8.78
Fiscal 2011	6.58		8.55
Fiscal 2012	0.60		8.31

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At March 31, 2009, Laclede Gas also had 17.5 million MMBtu of other price risk mitigation in place through the use of NYMEX natural gas option-based strategies.

The Effect of Derivative Instruments on the Statements of Income and Comprehensive Income
(Thousands)	Three Months Ended March 31, 2009
Derivatives in SFAS No. 133 Cash Flow Hedging Relationships		Amount of Gain/(Loss) Recognized in OCI on Derivative (Effective Portion)		Location of Gain/(Loss) Reclassified from Accumulated OCI Into Income (Effective Portion)	Amount of Gain/(Loss) Reclassified from Accumulated OCI Into Income (Effective Portion)		Location of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion And Amount Excluded from Effectiveness Testing)	Amount of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
NYMEX gasoline and heating oil contracts		$	106	Other Regulated Gas Distribution Operating Expenses	$	—	Other Regulated Gas Distribution Operating Expenses	$	31

Derivatives Not Designated as Hedging Instruments under SFAS No. 133*	Location of Gain/(Loss) Recognized in Income on Derivative	Amount of Gain/(Loss) Recognized in Income on Derivative
NYMEX gasoline and heating oil contracts	Other Income and (Income Deductions) – Net		$	7

* Gains and losses on Laclede Gas’ NYMEX natural gas derivative instruments, which are not designated as hedging instruments under SFAS No. 133, are deferred and recorded as regulatory assets or regulatory liabilities pursuant to SFAS No. 71. These gains and losses are excluded from the table above because they have no direct impact on the Statement of Income.

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Fair Value of Derivative Instruments in the Balance Sheet at March 31, 2009
	Asset Derivatives				Liability Derivatives
(Thousands)	Balance Sheet Location		Fair Value	*	Balance Sheet Location		Fair Value	*
Derivatives designated as hedging instruments under SFAS No. 133
NYMEX gasoline and     heating oil contracts	Derivative Instrument Assets	$	137		Derivative Instrument Assets	$	—
Derivatives not designated as hedging instruments under SFAS No. 133
NYMEX natural gas contracts	Derivative Instrument Assets		5,099		Derivative Instrument Assets		112,215
NYMEX gasoline and     heating oil contracts	Derivative Instrument Assets		7		Derivative Instrument Assets		—
Sub-total			5,106				112,215
Total derivatives		$	5,243			$	112,215

* The fair values of Asset Derivatives and Liability Derivatives exclude the fair value of cash margin receivables or payables with counterparties subject to netting arrangements. At March 31, 2009, the amounts excluded were $135.9 million in receivables, all of which were associated with NYMEX contracts. Fair value amounts of derivative contracts (including the fair value amounts of cash margin receivables and payables) for which there is a legal right to set off are presented net on the Balance Sheet. As such, the gross balances presented in the table above are not indicative of the Utility’s net economic exposure. Refer to Note 3, Fair Value Measurements, for information on the valuation of derivative instruments.

5. OTHER INCOME AND (INCOME DEDUCTIONS) – NET

	Three Months Ended						Six Months Ended
	March 31,						March 31,
(Thousands)	2009			2008			2009			2008
Interest income	$	525		$	389		$	1,535		$	1,544
Other income		775			3			1,186			540
Other income deductions		(1,264	)		(915	)		(2,075	)		(575	)
Other Income and (Income Deductions) – Net	$	36		$	(523	)	$	646		$	1,509

The increase in Other Income and (Income Deductions) – Net for the quarter ended March 31, 2009, compared with the quarter ended March 31, 2008, was primarily due to higher net investment income.

The decrease in Other Income and (Income Deductions) – Net for the six months ended March 31, 2009, compared with the six months ended March 31, 2008, was primarily due to higher net investment losses and the effect of proceeds received during the six months ended March 31, 2008 related to the Company’s interest, as a policyholder, in the sale of a mutual insurance company, partially offset by other variations.

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6. INFORMATION BY OPERATING SEGMENT

The Regulated Gas Distribution segment consists of the regulated operations of Laclede Gas. The Non-Regulated Other segment includes the retail sale of gas appliances. There are no material intersegment revenues.

	Regulated		Non-			Adjustments
	Gas		Regulated			&
(Thousands)	Distribution		Other			Eliminations		Total
Three Months Ended
March 31, 2009
Operating revenues	$	440,468	$	599		$	—	$	441,067
Net income		22,177		9			—		22,186
Total assets		1,609,714		1,929			—		1,611,643
Six Months Ended
March 31, 2009
Operating revenues	$	798,569	$	1,196		$	—	$	799,765
Net income		38,333		50			—		38,383
Total assets		1,609,714		1,929			—		1,611,643
Three Months Ended
March 31, 2008
Operating revenues	$	507,089	$	740		$	—	$	507,829
Net income (loss)		25,340		(40	)		—		25,300
Total assets		1,454,369		1,814			—		1,456,183
Six Months Ended
March 31, 2008
Operating revenues	$	827,981	$	1,526		$	—	$	829,507
Net income (loss)		41,097		(2	)		—		41,095
Total assets		1,454,369		1,814			—		1,456,183

7. COMMITMENTS AND CONTINGENCIES

Commitments

Laclede Gas has entered into various contracts, expiring on dates through 2017, for the storage, transportation, and supply of natural gas. Minimum payments required under the contracts in place at March 31, 2009 are estimated at approximately $381 million. Additional contracts are generally entered into prior to or during the heating season. Laclede Gas recovers its costs from customers in accordance with the PGA Clause.

Leases and Guarantees

Laclede Gas has several operating leases for the rental of vehicles that contain provisions requiring Laclede Gas to guarantee certain amounts related to the residual value of the leased property. These leases have various terms, the longest of which extends into 2014. At March 31, 2009, the maximum guarantees under these leases are $1.8 million. As of March 31, 2009, the Utility believes that it is unlikely that it will be subject to the maximum payment amount because it estimates that the residual value of the leased vehicles will be adequate to satisfy most of the guaranteed amounts. At March 31, 2009, the carrying value of the liability recognized for these guarantees was $0.3 million.

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Contingencies

Laclede Gas owns and operates natural gas distribution, transmission, and storage facilities, the operations of which are subject to various environmental laws, regulations, and interpretations. While environmental issues resulting from such operations arise in the ordinary course of business, such issues have not materially affected Laclede Gas’ financial position and results of operations. As environmental laws, regulations, and their interpretations change, however, Laclede Gas may be required to incur additional costs. See Note 12 to the Financial Statements included in Exhibit 99.1 of the Laclede Group’s Fiscal Year 2008 Form 10-K for information relative to environmental matters generally.

As reported in the Utility’s Form 10-K for the fiscal year ended September 30, 2008, Laclede Gas has identified three sites on which manufactured gas plant operations took place where the Utility faces the risk of environmental liabilities. One site is currently owned by an agency of the City of Saint Louis (the owner agency). An affiliated City agency (the development agency) has selected a developer with whom it is negotiating a final site development contract which contemplates remediation and redevelopment of the property. In conjunction with the redevelopment, Laclede Gas and another former site owner have entered into an agreement with the owner and development agencies as well as their parent agency, the private developer of the property, and an environmental consultant (Remediation Agreement). Under the Remediation Agreement, the development agency and the private developer agreed to remediate the site, and Laclede Gas and the other former owner are to be released by the involved City agencies, the private developer, and the environmental consultant from certain liabilities for the past and current environmental condition of the property. Also under that agreement Laclede Gas and the former site owner agreed to pay, at the closing of the transaction, a small percentage of the cost of remediation (subject to a maximum amount). The transactions contemplated by the Remediation Agreement are expected to close during the fourth quarter of fiscal year 2009. The amount Laclede Gas expects to pay under the Remediation Agreement is not material and will not have a material impact on the future financial condition or results of operations of Laclede Gas.

On December 28, 2006, the MoPSC Staff proposed a disallowance of $7.2 million related to Laclede Gas’ recovery of its purchased gas costs applicable to fiscal 2005. On September 14, 2007, the Staff withdrew its pursuit of $5.5 million of the disallowance it had originally proposed. The remaining $1.7 million pertains to Laclede Gas’ purchase of gas from its marketing affiliate, Laclede Energy Resources (LER). Laclede Gas believes that the remaining portion of the proposed disallowance lacks merit and is vigorously opposing the adjustment in proceedings before the MoPSC. As such, no amount has been recorded in the financial statements for this proposed disallowance.

The MoPSC Staff has also proposed disallowances of gas costs relating to Laclede Gas purchases of gas supply from LER for fiscal years 2006 and 2007. On December 31, 2007, the MoPSC Staff proposed a disallowance of $2.8 million applicable to fiscal 2006, and on December 31, 2008, the MoPSC Staff proposed a disallowance of $1.5 million applicable to fiscal 2007. Laclede Gas believes that these proposed disallowances also lack merit and is vigorously opposing them in proceedings before the MoPSC. As such, no amount has been recorded in the financial statements for these proposed disallowances.

In the December 31, 2007 filing, the MoPSC Staff also raised questions regarding whether certain sales and capacity release transactions subject to the Federal Energy Regulatory Commission (FERC)’s oversight were consistent with the FERC’s regulations and policies regarding capacity release. Laclede Group commenced an internal review of the questions raised by the MoPSC Staff and notified the FERC Staff that it took this action. Subsequently, as a result of the internal review, the Laclede Group has provided the FERC Staff with a report regarding compliance of sales and capacity release activities with the FERC’s regulations and policies. On July 23, 2008, the FERC Staff requested additional information which Laclede Group provided on August 22, 2008 and September 2, 2008. On February 11, 2009, the FERC Staff submitted follow-up questions to the Laclede Group’s August and September 2008 responses, to which Laclede Group responded on February 25, 2009. On March 2, 2009, FERC Staff requested clarification of certain aspects of Laclede Group’s February 25, 2009 response, which Laclede Group clarified on March 4, 2009.

Laclede Gas is involved in other litigation, claims, and investigations arising in the normal course of business. While the results of such litigation cannot be predicted with certainty, management, after discussion with counsel, believes that the final outcome will not have a material adverse effect on the financial position or results of operations of the Utility.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

LACLEDE GAS COMPANY

This management’s discussion analyzes the financial condition and results of operations of Laclede Gas Company (Laclede Gas or the Utility). It includes management’s view of factors that affect its business, explanations of past financial results including changes in earnings and costs from the prior year periods, and their effects on overall financial condition and liquidity.

Certain matters discussed in this report, excluding historical information, include forward-looking statements. Certain words, such as “may,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “seek,” and similar words and expressions identify forward-looking statements that involve uncertainties and risks. Future developments may not be in accordance with our expectations or beliefs and the effect of future developments may not be those anticipated. Among the factors that may cause results to differ materially from those contemplated in any forward-looking statement are:

• weather conditions and catastrophic events, particularly severe weather in the natural gas producing areas of the country;

• volatility in gas prices, particularly sudden and sustained changes in natural gas prices, including the related impact on margin deposits associated with the use of natural gas derivative instruments;

• the impact of higher natural gas prices on our competitive position in relation to suppliers of alternative heating sources, such as electricity;

• changes in gas supply and pipeline availability; particularly those changes that impact supply for and access to our service area;

• legislative, regulatory and judicial mandates and decisions, some of which may be retroactive, including those affecting

• allowed rates of return

• incentive regulation

• industry structure

• purchased gas adjustment provisions

• rate design structure and implementation

• franchise renewals

• environmental or safety matters

• taxes

• pension and other postretirement benefit liabilities and funding obligations

• accounting standards;

• the results of litigation;

• retention of, ability to attract, ability to collect from, and conservation efforts of customers;

• capital and energy commodity market conditions, including the ability to obtain funds with reasonable terms for necessary capital expenditures and general operations and the terms and conditions imposed for obtaining sufficient gas supply;

• discovery of material weakness in internal controls; and

• employee workforce issues.

Readers are urged to consider the risks, uncertainties, and other factors that could affect our business as described in this report. All forward-looking statements made in this report rely upon the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. We do not, by including this statement, assume any obligation to review or revise any particular forward-looking statement in light of future events.

The Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Utility’s Financial Statements and the Notes thereto.

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LACLEDE GAS COMPANY

RESULTS OF OPERATIONS

Laclede Gas is regulated by the Missouri Public Service Commission (MoPSC or Commission) and serves the City of St. Louis and parts of ten other counties in eastern Missouri. Laclede Gas delivers natural gas to retail customers at rates and in accordance with tariffs authorized by the MoPSC. The Utility’s earnings are primarily generated by the sale of heating energy. The Utility’s weather mitigation rate design lessens the impact of weather volatility on Laclede Gas customers during cold winters and stabilizes the Utility’s earnings by recovering fixed costs more evenly during the heating season. Due to the seasonal nature of the business of Laclede Gas, earnings are typically concentrated in the November through April period, which generally corresponds with the heating season.

Mitigating the impact of weather fluctuations on Laclede Gas customers while improving the ability to recover its authorized distribution costs and return continues to be a fundamental component of Laclede Gas’ strategy. The Utility’s distribution costs are the essential, primarily fixed expenditures it must incur to operate and maintain a more than 16,000 mile natural gas distribution system and related storage facilities. With regard to the storage facilities owned by Laclede Gas, management is currently undertaking an evaluation of the Utility’s natural gas storage field, which was developed more than 50 years ago, to assess the field’s current and future capabilities. In addition, Laclede Gas is working continually to improve its ability to provide reliable natural gas service at a reasonable cost, while maintaining and building a secure and dependable infrastructure. The settlement of the Utility’s 2007 rate case resulted in enhancements to the Utility’s weather mitigation rate design that better ensures the recovery of its fixed costs and margins despite variations in sales volumes due to the impacts of weather and other factors that affect customer usage. The Utility’s income from off-system sales remains subject to fluctuations in market conditions. Effective October 1, 2007, the Utility is allowed to retain 15% to 25% of the first $6 million in annual income earned (depending on the level of income earned) and 30% of income exceeding $6 million annually. Some of the factors impacting the level of off-system sales include the availability and cost of the Utility’s natural gas supply, the weather in its service area, and the weather in other markets. When Laclede Gas’ service area experiences warmer-than-normal weather while other markets experience colder weather or supply constraints, some of the Utility’s natural gas supply is available for off-system sales and there may be a demand for such supply in other markets.

Laclede Gas continues to work actively to reduce the impact of higher costs associated with wholesale natural gas prices by strategically structuring its natural gas supply portfolio and through the use of derivative instruments. Nevertheless, the overall cost of purchased gas remains subject to fluctuations in market conditions. The Utility’s Purchased Gas Adjustment (PGA) Clause allows Laclede Gas to flow through to customers, subject to prudence review, the cost of purchased gas supplies, including costs, cost reductions, and related carrying costs associated with the use of derivative instruments to hedge the purchase price of natural gas, as well as gas inventory carrying costs. The Utility believes it will continue to be able to obtain sufficient gas supply. High natural gas prices and other economic conditions may affect sales volumes (due to the conservation efforts of customers) and cash flows (associated with the timing of collection of gas costs and related accounts receivable from customers).

Quarter Ended March 31, 2009

Earnings

Laclede Gas’ net income for the quarter ended March 31, 2009 was $22.2 million, compared with net income of $25.3 million for the quarter ended March 31, 2008. The decrease in net income was primarily due to the following factors, quantified on a pre-tax basis:

• increases in operation and maintenance expenses, excluding the provision for uncollectible accounts, totaling $4.0 million; and,

• the effect of the recognition of previously unrecognized tax benefits and the reversal of related expenses recorded during the quarter ended March 31, 2008, totaling $1.1 million.

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These factors were partially offset by:

• a lower provision for uncollectible accounts totaling $1.3 million;

• higher income from off-system sales and capacity release totaling $1.0 million; and,

• higher Infrastructure System Replacement Surcharge (ISRS) revenues totaling $0.9 million.

Utility Operating Revenues

Laclede Gas passes on to Utility customers (subject to prudence review) increases and decreases in the wholesale cost of natural gas in accordance with its PGA Clause. The volatility of the wholesale natural gas market results in fluctuations from period to period in the recorded levels of, among other items, revenues and natural gas cost expense. Nevertheless, increases and decreases in the cost of gas associated with system gas sales volumes have no direct effect on net revenues and net income.

Utility Operating Revenues for the quarter ended March 31, 2009 were $440.5 million, or $66.6 million less than the same period last year. Temperatures experienced in the Utility’s service area during the quarter were 9.3% warmer than the same quarter last year and 6.2% warmer than normal. Total system therms sold and transported were 0.40 billion for the quarter ended March 31, 2009 compared with 0.45 billion for the same period last year. Total off-system therms sold and transported were 0.08 billion for the quarter ended March 31, 2009 compared with 0.06 billion for the same period last year. The decrease in Utility Operating Revenues was primarily attributable to the following factors:

(Millions)
Lower system sales volumes and other variations	$	(43.8	)
Lower prices charged for off-system sales		(38.3	)
Higher off-system sales volumes		24.5
Lower wholesale gas costs passed on to Utility customers (subject to prudence review by the MoPSC)		(9.9	)
Higher ISRS revenues		0.9
Total Variation	$	(66.6	)

Utility Operating Expenses

Utility Operating Expenses for the quarter ended March 31, 2009 decreased $61.9 million from the same quarter last year. Natural and propane gas expense decreased $64.0 million, or 17.0%, from last year’s level, primarily attributable to decreased volumes purchased for sendout, lower rates charged by our suppliers, and lower off-system gas expense. Other operation and maintenance expenses increased $2.7 million, or 6.0%, primarily due to higher maintenance charges, increases in compensation expenses, and higher group insurance charges, partially offset by a lower provision for uncollectible accounts. Taxes, other than income taxes, decreased $1.0 million, or 3.6%, primarily due to decreased gross receipts taxes (attributable to lower revenues).

Other Income and (Income Deductions) - Net

Other Income and (Income Deductions) – Net increased $0.6 million primarily due to higher net investment income.

Interest Charges

The $0.2 million decrease in interest charges was primarily due to lower interest on short-term debt. This decrease was largely offset by an increase in interest on long-term debt, primarily attributable to the issuance of $80.0 million principal amount of 6.35% First Mortgage Bonds on September 23, 2008. Average short-term interest rates were 1.0% for the quarter ended March 31, 2009 compared with 4.1% for the quarter ended March 31, 2008. Average short-term borrowings were $284.1 million for the quarter ended March 31, 2009 compared with $217.5 million for the quarter ended March 31, 2008.

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Income Taxes

The $0.7 million decrease in income taxes was primarily due to lower pre-tax income, partially offset by the recognition of previously unrecognized tax benefits recorded during the quarter ended March 31, 2008, pursuant to Financial Accounting Standards Board Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes.”

Six Months Ended March 31, 2009

Earnings

Laclede Gas’ net income for the six months ended March 31, 2009 was $38.4 million, compared with net income of $41.1 million for the six months ended March 31, 2008. The decrease in net income was primarily due to the following factors, quantified on a pre-tax basis:

• increases in operation and maintenance expenses, excluding the provision for uncollectible accounts, totaling $5.2 million; and,

• the effect of the recognition of previously unrecognized tax benefits and the reversal of related expenses recorded during the six months ended March 31, 2008, totaling $1.1 million.

These factors were partially offset by:

• higher ISRS revenues totaling $1.7 million;

• higher income from off-system sales and capacity release totaling $1.2 million; and,

• a lower provision for uncollectible accounts totaling $1.1 million.

Utility Operating Revenues

Utility Operating Revenues for the six months ended March 31, 2009 were $798.6 million, or $29.4 million less than the same period last year. Temperatures experienced in the Utility’s service area during the six months ended March 31, 2009 were 0.8% warmer than the same period last year and 1.7% warmer than normal. Total system therms sold and transported were 0.71 billion for the six months ended March 31, 2009 compared with 0.72 billion for the same period last year. Total off-system therms sold and transported were 0.12 billion for the six months ended March 31, 2009 compared with 0.11 billion for the same period last year. The decrease in Utility Operating Revenues was primarily attributable to the following factors:

(Millions)
Lower prices charged for off-system sales	$	(36.5	)
Higher off-system sales volumes		12.8
Lower system sales volumes and other variations		(5.8	)
Higher ISRS revenues		1.7
Lower wholesale gas costs passed on to Utility customers (subject to prudence review by the MoPSC)		(1.6	)
Total Variation	$	(29.4	)

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Utility Operating Expenses

Utility Operating Expenses for the six months ended March 31, 2009 decreased $26.4 million from the same period last year. Natural and propane gas expense decreased $32.0 million, or 5.3%, from last year’s level, primarily attributable to lower off-system gas expense, decreased volumes purchased for sendout, and lower rates charged by our suppliers. Other operation and maintenance expenses increased $4.1 million, or 4.7%, primarily due to higher maintenance charges, increases in compensation expenses, and higher group insurance charges, partially offset by a lower provision for uncollectible accounts.

Other Income and (Income Deductions) - Net

Other Income and (Income Deductions) – Net decreased $0.9 million primarily due to higher net investment losses and the effect of proceeds received during the six months ended March 31, 2008 related to the Company’s interest, as a policyholder, in the sale of a mutual insurance company, partially offset by other variations.

Interest Charges

The minor decrease in interest charges was primarily due to lower interest on short-term debt, largely offset by an increase in interest on long-term debt, primarily attributable to the issuance of $80.0 million principal amount of 6.35% First Mortgage Bonds on September 23, 2008. Average short-term interest rates were 2.1% for the six months ended March 31, 2009 compared with 4.7% for the six months ended March 31, 2008. Average short-term borrowings were $310.0 million for the six months ended March 31, 2009 compared with $236.4 million for the six months ended March 31, 2008.

Income Taxes

The $1.0 million decrease in income taxes was primarily due to lower pre-tax income and the effect of various property-related items, partially offset by the recognition of previously unrecognized tax benefits recorded during the six months ended March 31, 2008 pursuant to FIN 48.

Labor Agreement

The Missouri Natural Division of Laclede Gas has a labor agreement with Local 884 of the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied-Industrial and Service Workers International Union, which represents approximately 5% of Laclede Gas’ employees. On April 15, 2009, a new four-year labor agreement was reached replacing the prior agreement which expired on that same date. The new agreement, which expires at midnight on April 14, 2013, includes revisions to the defined benefit pension plan formula, changes in wage rates and work rules, and other modifications that enable the Utility to provide high quality service to its customers and control operating costs while continuing to provide competitive wages, pension, and healthcare benefits to its employees.

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REGULATORY MATTERS

During fiscal 2006, the MoPSC approved permanent modifications to the Cold Weather Rule affecting the disconnection and reconnection practices of utilities during the winter heating season. Those modifications included provisions to allow the Utility to obtain accounting authorizations and defer for future recovery certain costs incurred with the modifications. During fiscal 2007, the Utility deferred for future recovery $2.7 million of costs associated with the fiscal 2007 heating season. On October 31, 2007, the Utility filed for determination and subsequent recovery of the deferred amount. On November 16, 2007, the MoPSC directed the MoPSC Staff and the Missouri Office of Public Counsel (Public Counsel) to submit their positions regarding the Utility’s filing by February 28, 2008. On February 28, 2008, the Utility and the MoPSC Staff filed a Non-Unanimous Stipulation & Agreement in which these parties agreed to a recovery of $2.5 million of costs. The Non-Unanimous Stipulation & Agreement was opposed by Public Counsel, and a hearing in this matter was held before the Commission on March 31, 2008. On April 17, 2008, the Commission issued its Report and Order approving the $2.5 million cost recovery recommended by the Utility and the MoPSC Staff. Consistent with the approved amount, the Utility recorded a reduction in its deferral totaling $0.2 million during the quarter ended March 31, 2008. On May 29, 2008, Public Counsel appealed the MoPSC’s April 17 Order to the Cole County, Missouri Circuit Court. On January 6, 2009, the Court issued its judgment affirming the Commission’s order approving the Cold Weather Rule compliance cost amount that the Utility and Staff had recommended over Public Counsel’s objection. On February 9, 2009, Public Counsel appealed the Circuit Court’s affirmation of the MoPSC’s April 17, 2008 Order to the Court of Appeals for the Western District of Missouri.

On December 28, 2006, the MoPSC Staff proposed a disallowance of $7.2 million related to Laclede Gas’ recovery of its purchased gas costs applicable to fiscal 2005. On September 14, 2007, the Staff withdrew its pursuit of $5.5 million of the disallowance it had originally proposed. The remaining $1.7 million pertains to Laclede Gas’ purchase of gas from its marketing affiliate, Laclede Energy Resources (LER). Laclede Gas believes that the remaining portion of the proposed disallowance lacks merit and is vigorously opposing the adjustment in proceedings before the MoPSC. As such, no amount has been recorded in the financial statements for this proposed disallowance.

The MoPSC Staff has also proposed disallowances of gas costs relating to Laclede Gas purchases of gas supply from LER for fiscal years 2006 and 2007. On December 31, 2007, the MoPSC Staff proposed a disallowance of $2.8 million applicable to fiscal 2006, and on December 31, 2008, the MoPSC Staff proposed a disallowance of $1.5 million applicable to fiscal 2007. Laclede Gas believes that these proposed disallowances also lack merit and is vigorously opposing them in proceedings before the MoPSC. As such, no amount has been recorded in the financial statements for these proposed disallowances.

In the December 31, 2007 filing, the MoPSC Staff also raised questions regarding whether certain sales and capacity release transactions, subject to the Federal Energy Regulatory Commission (FERC)’s oversight, were consistent with the FERC’s regulations and policies regarding capacity release. Laclede Group commenced an internal review of the questions raised by the MoPSC Staff and notified the FERC Staff that it took this action. Subsequently, as a result of the internal review, Laclede Group has provided the FERC Staff with a report regarding compliance of sales and capacity release activities with the FERC’s regulations and policies. On July 23, 2008, the FERC Staff requested additional information, which Laclede Group provided on August 22, 2008 and September 2, 2008. On February 11, 2009, the FERC Staff submitted follow-up questions to the Laclede Group’s August and September 2008 responses, to which Laclede Group responded on February 25, 2009. On March 2, 2009, FERC Staff requested clarification of certain aspects of Laclede Group’s February 25, 2009 response, which Laclede Group clarified on March 4, 2009.

On July 9, 2008, Laclede Gas made a tariff filing with the MoPSC that would make the payment provisions for the restoration of gas service under the Utility’s Cold Weather Rule available to customers in the summer of 2008 and enable the Utility to increase or decrease its PGA rates to correct for any shortfall or surplus created by the difference between the gas cost portion of the Utility’s actual net bad debt write-offs and the amount of such cost that is embedded in its existing rates. The MoPSC suspended the tariff on August 5, 2008 and established a procedural schedule to consider the Utility’s filing. As a result, the Cold Weather Rule portion of the filing is now moot. A formal hearing pertaining to the bad debt portion of the filing was held on January 5, 2009. On April 15, 2009, the Commission issued its Order rejecting the Utility’s tariffs. Laclede Gas has filed for rehearing of the Commission’s Order and is pursuing other alternatives for addressing this issue.

On November 21, 2008, the Utility made an ISRS filing with the Commission designed to increase revenues by $1.9 million annually. After the Utility updated the filing, on February 4, 2009, the MoPSC approved an annual increase of $2.1 million that became effective February 6, 2009. On April 28, 2009, the Utility made an ISRS filing with the Commission designed to increase revenues by $2.5 million annually. This filing is pending Commission approval.

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CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition, results of operations, liquidity, and capital resources is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. Generally accepted accounting principles require that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Our critical accounting policies used in the preparation of our Financial Statements are described in Exhibit 99.1 of the Laclede Group’s Form 10-K for the fiscal year ended September 30, 2008 and include the following:

• Allowances for doubtful accounts

• Employee benefits and postretirement obligations

• Regulated operations

There were no significant changes to these critical accounting policies during the six months ended March 31, 2009. For discussion of other significant accounting policies, see Note 1 to the Financial Statements included in Exhibit 99.1 of the Laclede Group’s Form 10-K for the fiscal year ended September 30, 2008.

ACCOUNTING PRONOUNCEMENTS

Laclede Gas has evaluated or is in the process of evaluating the impact that recently issued accounting standards will have on the Utility’s financial position or results of operations upon adoption. For disclosures related to the adoption of new accounting standards, see the New Accounting Standards section of Note 1 to the Financial Statements.

FINANCIAL CONDITION

CREDIT RATINGS

As of March 31, 2009, credit ratings for outstanding securities for Laclede Gas issues were as follows:

Type of Facility	S&P	Moody’s	Fitch
Laclede Gas Issuer Rating	A		A-
Laclede Gas First Mortgage Bonds	A	A3	A+
Laclede Gas Commercial Paper	A-1	P-2	F1

The Utility has investment grade ratings, and believes that it will have adequate access to the financial markets to meet its capital requirements. These ratings remain subject to review and change by the rating agencies.

CASH FLOWS

Laclede Gas’ short-term borrowing requirements typically peak during colder months when Laclede Gas borrows money to cover the lag between when it purchases its natural gas and when its customers pay for that gas. Changes in the wholesale cost of natural gas (including cash payments for margin deposits associated with the Utility’s use of natural gas derivative instruments), variations in the timing of collections of gas cost under the Utility’s PGA Clause, the seasonality of accounts receivable balances, and the utilization of storage gas inventories cause short-term cash requirements to vary during the year and from year to year, and can cause significant variations in the Utility’s cash provided by or used in operating activities.

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Net cash provided by operating activities for the six months ended March 31, 2009 was $68.2 million, compared with $122.6 million for the same period last year. The difference is primarily attributable to variations associated with the timing of the collections of gas cost under the Utility’s PGA Clause, including the effects of this year’s increases in net cash payments for margin deposits associated with the Utility’s use of natural gas derivative instruments. These variations were partially offset by reduced cash payments to Laclede Group for the Utility’s allocation of income taxes this year.

Net cash used in investing activities for the six months ended March 31, 2009 was $26.9 million compared with $26.2 million for the six months ended March 31, 2008. Cash used in investing activities primarily reflected capital expenditures in both periods.

Net cash used in financing activities was $41.5 million for the six months ended March 31, 2009 compared with $94.0 million for the six months ended March 31, 2008. The variation primarily reflects the effect of the maturity of long-term debt last year and the sale of additional shares of common stock to Laclede Group this year, partially offset by increases in net repayments of short-term debt this year.

LIQUIDITY AND CAPITAL RESOURCES

Short-term Debt

As indicated above, the Utility’s short-term borrowing requirements typically peak during the colder months. These short-term cash requirements can be met through the sale of commercial paper supported by lines of credit with banks. Laclede Gas has a syndicated line of credit in place of $320 million from 10 banks, with the largest portion provided by a single bank being 17.5%. This line expires in December 2011. In November 2008, the Utility established a seasonal line of credit of $75 million, which expired in March 2009. Including both lines of credit, the largest portion provided by a single bank was 26.8%. During the six months ended March 31, 2009, Laclede Gas utilized both its syndicated line of credit and commercial paper for short-term funding. Commercial paper outstanding at March 31, 2009 was $198.8 million, while outstanding bank line advances were $40.0 million. The weighted average interest rate on these short-term borrowings was 0.7% per annum at March 31, 2009. Based on total short-term borrowings at March 31, 2009, a change in interest rate of 100 basis points would increase or decrease pre-tax earnings and cash flows by approximately $2.4 million on an annual basis. Portions of such increases or decreases may be offset through the application of PGA carrying costs. Although Laclede Gas borrowed funds from Laclede Group from time to time within the six months ended March 31, 2009, there were no such borrowings outstanding at the end of the period. The Utility had short-term borrowings (including borrowings from Laclede Group) aggregating to a maximum of $386.4 million at any one time during the six months ended March 31, 2009. Excluding borrowings from Laclede Group, the Utility’s maximum borrowings for the period were $309.9 million.

Laclede Gas’ lines of credit include covenants limiting total debt, including short-term debt, to no more than 70% of total capitalization and requiring earnings before interest, taxes, depreciation, and amortization (EBITDA) to be at least 2.25 times interest expense. On March 31, 2009, total debt was 60% of total capitalization. For the twelve months ended March 31, 2009, EBITDA was 3.88 times interest expense.

Long-term Debt

At March 31, 2009, Laclede Gas had fixed-rate long-term debt totaling $390 million. While these long-term debt issues are fixed-rate, they are subject to changes in fair value as market interest rates change. However, increases or decreases in fair value would impact earnings and cash flows only if Laclede Gas were to reacquire any of these issues in the open market prior to maturity.

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Equity and Shelf Registration

Laclede Gas has on file with the Securities and Exchange Commission an effective shelf registration on Form S-3 for issuance of $350 million of First Mortgage Bonds, unsecured debt, and preferred stock, of which $270 million remains available to Laclede Gas at this time. The Utility has authority from the MoPSC to issue up to $500 million in First Mortgage Bonds, unsecured debt, and equity securities, of which $371.1 million remained available under this authorization as of March 31, 2009. During the six months ended March 31, 2009, pursuant to this authority, the Utility sold 1,198 shares of its common stock to Laclede Group for $41.3 million. The amount, timing, and type of additional financing to be issued will depend on cash requirements and market conditions.

On March 31, 2009, Laclede Gas redeemed all of its outstanding 5% Series B and 4.56% Series C preferred stock, totaling $0.6 million, at its par value of $25 per share in addition to the dividend paid on that same date.

Guarantees

Laclede Gas has several operating leases for the rental of vehicles that contain provisions requiring Laclede Gas to guarantee certain amounts related to the residual value of the leased property. These leases have various terms, the longest of which extends into 2014. At March 31, 2009, the maximum guarantees under these leases were $1.8 million. However, the Utility estimates that the residual value of the leased vehicles will be adequate to satisfy most of the guaranteed amounts. At March 31, 2009, the carrying value of the liability recognized for these guarantees was $0.3 million.

Other

Utility capital expenditures were $25.7 million for the six months ended March 31, 2009, compared with $26.4 million for the same period last year.

Capitalization at March 31, 2009, consisted of 52.1% common stock equity and 47.9% long-term debt.

It is management’s view that Laclede Gas has adequate access to capital markets and will have sufficient capital resources, both internal and external, to meet anticipated capital requirements.

The seasonal nature of Laclede Gas’ sales affects the comparison of certain balance sheet items at March 31, 2009 and at September 30, 2008, such as Accounts receivable – net, Gas stored underground, Notes payable, Accounts payable, Regulatory assets and Regulatory liabilities, and Delayed and Advance customer billings. The Balance Sheet at March 31, 2008 is presented to facilitate comparison of these items with the corresponding interim period of the preceding fiscal year.

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CONTRACTUAL OBLIGATIONS

As of March 31, 2009, Laclede Gas had contractual obligations with payments due as summarized below (in millions):

			Payments due by period
			Remaining						Fiscal Years
Contractual Obligations	Total		Fiscal Year 2009		Fiscal Years 2010-2011		Fiscal Years 2012-2013		2014 and thereafter
Principal Payments on Long-Term Debt	$	390.0	$	—	$	25.0	$	25.0	$	340.0
Interest Payments on Long-Term Debt		521.8		12.3		48.4		45.1		416.0
Operating Leases (a)		15.8		2.7		8.1		3.6		1.4
Purchase Obligations – Natural Gas (b)		381.1		88.8		157.5		100.8		34.0
Purchase Obligations – Other (c)		107.1		9.3		25.3		17.5		55.0
Total (d)	$	1,415.8	$	113.1	$	264.3	$	192.0	$	846.4

(a)	Operating lease obligations are primarily for office space, vehicles, and power operated equipment. Additional payments will be incurred if renewal options are exercised under the provisions of certain agreements.
(b)	These purchase obligations represent the minimum payments required under existing natural gas transportation and storage contracts and natural gas supply agreements. These amounts reflect fixed obligations as well as obligations to purchase natural gas at future market prices, calculated using March 31, 2009 New York Mercantile Exchange futures prices. Laclede Gas recovers the costs related to its purchases, transportation, and storage of natural gas through the operation of its PGA Clause, subject to prudence review; however, variations in the timing of collections of gas costs from customers affect short-term cash requirements. Additional contractual commitments are generally entered into prior to or during the heating season.
(c)	These purchase obligations reflect miscellaneous agreements for the purchase of materials and the procurement of services necessary for normal operations.
(d)	The categories of Capital Leases and Other Long-Term liabilities have been excluded from the table above because there are no applicable amounts of contractual obligations under these categories. Also, commitments related to pension and postretirement benefit plans have been excluded from the table above. The Utility expects to make contributions to its qualified, trusteed pension plans totaling $1.5 million during the remainder of fiscal year 2009. Laclede Gas anticipates a $0.7 million contribution relative to its non-qualified pension plans during the remainder of fiscal year 2009. With regard to the postretirement benefits, the Utility anticipates it will contribute $6.6 million to the qualified trusts and $0.2 million directly to participants from Laclede Gas’ funds during the remainder of fiscal year 2009. For further discussion of the Utility’s pension and postretirement benefit plans, refer to Note 2, Pension Plans and Other Postretirement Benefits, of the Notes to Financial Statements.

MARKET RISK

Laclede Gas’ commodity price risk, which arises from market fluctuations in the price of natural gas, is primarily managed through the operation of its PGA Clause. The PGA Clause allows Laclede Gas to flow through to customers, subject to prudence review, the cost of purchased gas supplies. The Utility is allowed the flexibility to make up to three discretionary PGA changes during each year, in addition to its mandatory November PGA change, so long as such changes are separated by at least two months. The Utility is able to mitigate, to some extent, changes in commodity prices through the use of physical storage supplies and regional supply diversity. Laclede Gas also has a risk management policy that allows for the purchase of natural gas derivative instruments with the goal of managing its price risk associated with purchasing natural gas on behalf of its customers. This policy prohibits speculation. Costs and cost reductions, including carrying costs, associated with the Utility’s use of natural gas derivative instruments are allowed to be passed on to the Utility’s customers through the operation of its PGA Clause. Accordingly, Laclede Gas does not expect any adverse earnings impact as a result of the use of these derivative instruments. However, the timing of recovery for cash payments related to margin requirements may cause short-term cash requirements to vary. Nevertheless, carrying costs associated with such requirements, as well as other variations in the timing of collections of gas costs, are recovered through the PGA Clause. For more information about the Utility’s natural gas derivative instruments, see Note 4 to the Financial Statements.

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The Utility is also subject to interest rate risk associated with its long-term and short-term debt issuances. Refer to the Liquidity and Capital Resources section of this Management’s Discussion and Analysis for information about the effect of changes in interest rates.

ENVIRONMENTAL MATTERS

Laclede Gas owns and operates natural gas distribution, transmission, and storage facilities, the operations of which are subject to various environmental laws, regulations, and interpretations. While environmental issues resulting from such operations arise in the ordinary course of business, such issues have not materially affected Laclede Gas’ financial position and results of operations. As environmental laws, regulations, and their interpretations change, however, Laclede Gas may be required to incur additional costs. For information relative to environmental matters, see Note 12 to the Financial Statements included in Exhibit 99.1 of the Laclede Group’s Form 10-K for the fiscal year ended September 30, 2008. For changes during the six months ended March 31, 2009, see Note 7 to the Financial Statements of this report.

OFF-BALANCE SHEET ARRANGEMENTS

Laclede Gas has no off-balance sheet arrangements.

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